Goodyear Tire & Rubber Q1 Earnings Call Highlights

Key Points

• Goodyear reported Q1 sales of $3.9 billion with unit volume down ~12% and a non‑GAAP EPS loss of $0.39; segment operating income was $95 million and the Goodyear Forward program contributed $107 million, but volume, inflation and tariff adjustments weighed on results.
• Regionally, EMEA and Asia Pacific improved (EMEA OE share gains, Asia SOI +27%), while the Americas were “challenging,” with Americas unit volume down 17% due to weak consumer/commercial demand, retailer/distributor destocking and planned exits of low‑margin lines.
• Looking ahead, management expects commodity pressure to be a major drag—raw materials are forecast as roughly a $200 million headwind in H2 (about $300 million vs prior forecast)—and is pursuing price increases, new cost reductions and reduced 2026 CapEx to $725 million after Q1 free‑cash‑flow use of $893 million.

Goodyear Tire & Rubber NASDAQ: GT reported first-quarter 2026 results that management said were largely in line with expectations, as the company navigated industry declines in consumer original equipment (OE) and replacement demand across many markets. CEO and President Mark Stewart said Europe, the Middle East and Africa (EMEA) and Asia Pacific delivered year-over-year segment operating income (SOI) growth and margin improvement, while conditions in the Americas remained “challenging” amid weak demand, channel destocking and elevated promotion.

First-quarter results reflect volume pressure and cost headwinds

Executive Vice President and CFO Christina Zamarro said first-quarter sales were $3.9 billion, down about 9% from the prior year due to lower volume and the impact of divestitures completed last year. Unit volume declined 12%, driven by lower consumer replacement volume in the Americas and EMEA, partially offset by higher consumer OE volume tied to share gains.

Gross margin improved by half a point, which included a $46 million tariff adjustment related to the IEEPA Supreme Court decision in February, Zamarro said. SG&A rose $18 million due to currency, particularly the weaker U.S. dollar versus the euro; excluding currency, SG&A declined $10 million. Segment operating income was $95 million. After adjustments for significant items, Zamarro said non-GAAP earnings per share was a loss of $0.39, citing an “unusually high” effective tax rate due to country mix of earnings.

On the company’s SOI bridge, Zamarro said lower unit volume and factory utilization were a $159 million headwind, while price/mix versus raw materials was a $103 million benefit. The Goodyear Forward program contributed $107 million of benefits in the quarter. Inflation, tariffs and other costs were a $117 million headwind, including the $46 million IEEPA tariff adjustment.

Regional performance: EMEA and Asia improve, Americas pressured

Stewart said the Americas faced a combination of “weak consumer and commercial demand,” retailer and distributor destocking, and increased manufacturer promotion. Despite an industry decline in consumer OE demand tied to lower OEM production, Stewart said Goodyear gained about two points of OE market share in the Americas during the quarter.

In U.S. consumer replacement, Stewart said demand declined amid harsh winter weather and a cautious consumer, while promotions carried over from the fourth quarter. He said the company “stayed disciplined on price mix” and did not chase near-term volumes. The quarter also reflected planned portfolio actions to exit lower-margin, non-core brands and product lines.

Zamarro said Americas unit volume fell 17%, driven by lower U.S. consumer replacement volume and a significant decline in commercial volume. She cited retailer and distributor destocking, market share losses due to competition for shelf space in smaller rim sizes, and the company’s planned exits of low-margin product lines. Americas SOI was $37 million, “partly offset” by price/mix benefits and Goodyear Forward savings, but pressured by cost inflation and the IEEPA tariff adjustment.

In EMEA, Stewart said the company continued to gain consumer OE share (up roughly two points), marking the ninth consecutive quarter of OE share gains in the region, even as both OE and replacement industry volume declined. Replacement volume fell due to competition in low rim sizes and portfolio rationalization, he said.

Zamarro said EMEA unit volume declined 8.5% and segment operating income was $1 million. She noted the figure represented an increase of $13 million when adjusted for the sale of the Dunlop brand. Zamarro also highlighted a March rationalization plan to streamline sales and distribution and business processes, targeting $50 million in annual savings to be completed by 2028.

In Asia Pacific, Stewart called SOI margin “very strong,” with strategy focused on larger rim sizes gaining traction. He said premium tires above 18-inch rim sizes now account for 55% of consumer sales in the region, up four points year over year. Zamarro said Asia Pacific SOI increased 27% to $57 million, representing 12.5% of sales and a three-point margin expansion. Volume declined 3.8%, driven by lower OE volume, particularly in China, which Zamarro attributed to lower EV incentives versus last year.

Middle East conflict introduces cost and demand uncertainty

Both Stewart and Zamarro emphasized uncertainty tied to the conflict in the Middle East, particularly around raw materials, potential supply chain disruption and demand effects through vehicle miles traveled (VMT). Stewart noted historically elevated oil prices have reduced VMT, and “even modest changes” can shift replacement demand.

Zamarro said the company’s raw material outlook is based on spot prices as of April 29, which she said equated to crude oil of about $106 per barrel. In response to an analyst question, she pointed to sensitivities posted in the company’s supplemental materials and noted that oil-linked costs include synthetic rubber inputs such as butadiene and styrene, as well as pigments, chemicals and oils.

In EMEA, management said direct volume exposure to customers located in the Middle East is “relatively immaterial.” Zamarro added that prior to the conflict, the company fixed about 75% to 80% of its EMEA energy rate exposure for the year.

Second-quarter and full-year outlook: higher raw material costs, cost actions and lower CapEx

For 2026, Zamarro said the direct impacts from the conflict in Iran on the tire industry and Goodyear’s earnings “largely depends on its duration” and the resulting effects on customer demand, consumer demand and commodity costs. She said at current spot prices, raw materials are expected to be a $200 million headwind in the second half, representing about a $300 million headwind versus the company’s prior forecast.

Still, Zamarro reiterated Goodyear’s intent to offset raw material inflation through price/mix, while also pursuing “new and meaningful” operating and structural cost reductions.

For the second quarter, Zamarro said the company expects volumes to be lower year over year but improve from first-quarter levels “all else equal,” driven by new assortment wins, actions implemented in Q1 and a better alignment of sell-in to sell-out. She provided industry assumptions for Q2:

• Consumer replacement: down about 3% in North America and China; down about 2% in EMEA
• Commercial: down about 12% in North America; down about 3% to 4% in EMEA

Zamarro said production cuts in the first and second quarters, including actions to manage cash, will create approximately a $90 million unabsorbed overhead headwind, with a negative impact again expected in the third quarter. For Q2, she said price/mix should “step up meaningfully” from Q1, raw materials should be a benefit of roughly $100 million, and Goodyear Forward should deliver about $90 million of benefits. Inflation, tariffs and other costs are expected to be a roughly $200 million headwind.

Management also discussed recent pricing actions in response to raw material volatility. Zamarro said Goodyear announced price increases in EMEA of about 4% for consumer tires and about 7% to 8% for commercial tires in April and May, and said the company would continue to seek price/mix actions alongside cost efforts.

On capital allocation, Zamarro said Goodyear reduced planned 2026 capital expenditures to $725 million due to the demand environment and a “new best cost methodology” applied to capital spend. Stewart said the company views the CapEx work as improving efficiency rather than “starving the future,” adding that Goodyear believes its capital dollars “will go much further.”

Cash flow and balance sheet

Zamarro said free cash flow was a use of $893 million in the quarter, consistent with seasonality and largely in line with last year after excluding operating cash received in the first quarter of 2025 from the sale of OTR. Net debt declined almost $900 million from a year ago, reflecting debt repayment at the end of last year.

Asked about full-year free cash flow, Zamarro said it was “a little too early” to settle on an outcome given uncertainty around raw materials and demand, but emphasized the company’s focus on cash, the reduction in CapEx and a year-end working capital inflow target. She also said free cash flow guidance does not contemplate additional restructuring tied to potential future announcements, and she would not expect those to impact cash flow until next year.

In closing remarks, Stewart said the company is taking “decisive actions” to match its cost structure to demand while maintaining portfolio discipline toward more premium product mix, and management reiterated a focus on cash flow amid the uncertain environment.

About Goodyear Tire & Rubber NASDAQ: GT

The Goodyear Tire & Rubber Company is a leading tire manufacturer and rubber products supplier with more than a century of innovation in its portfolio. Founded in 1898 by Frank Seiberling in Akron, Ohio, the company has grown into a global enterprise known for its engineering expertise and quality standards. Over its history, Goodyear has pioneered advances in tire technology, from early pneumatic designs to modern high-performance and fuel-efficient solutions.

Goodyear's core business encompasses the design, production and distribution of tires for a variety of markets, including passenger cars, commercial trucks, off-the-road vehicles, aircraft and specialty applications.

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