Analysts Upgrade Goodyear

Analysts at the Deutsche Bank are upgrading Goodyear shares to “Hold” from “Sell”, saying that Goodyear shares have experienced a material correction since the bank lowered its recommendation to Sell in January. In the short term, the analysts say that they continue to see earnings risk associated with very weak demand, which may force Goodyear to idle factories in order to bring down inventories.

However, they do not believe the market is poised for a price war, which is the major concern for investors. Moreover, idling plants to take care of inventory problems appears to be a preferable strategic alternative in advance of labour contract negotiations. However, significant long term risks remain, including potential for margin pressure in emerging markets and the analysts say that they are concerned about Goodyear’s competitiveness, given its relatively low capital spending levels.