A Corporate Communications Corp. Publication ---- All Rights Reserved
Short-Term Report
March 23, 2004
52-week range $4.49-$11.97
Market Cap $1.30BM
Shares Outstanding 175.33M
Book Value $2.45
Price/Book 2.97
Average Daily Vol. 3.2M
Target Price $13.00
Target Percentage 76%
Goodyear Tire is the world’s largest tire manufacturer. In addition to tires, the company produces engineered rubber products such as bumpers and specialty chemicals.
The stock of Goodyear Tire has been an underperformer since our initial recommendation at $7.20 per share on October 9, 2003. While part of this underperformance can be traced to the somewhat poor market condition, of late; the main culprit has been a delay in filing the annual report. This delay was requested by Goodyear in order to thoroughly complete its investigation into it’s accounting systems. Goodyear has discovered some problems in its accounting system which was caused by the installation of a new software program.
While this delay has caused a degree of uncertainty within the investment markets, we do not believe there are any serious problems.We believe the current price of $7.40 per share is an overreaction to the uncertainty.
Our positive posture on Goodyear Tire continues to be predicated on the following factors:
  • The newly restructured company has entailed a realignment of management functions and a closure of a number of plants. Consequently, Goodyear has meaningfully improved its cost structure.
  • In addition to its operational restructuring, Goodyear has substantially improved its dealer network, which is most important.
  • Recently, the Chinese Government has issued new regulations regarding extending credit to consumers for automobile purchases. This is an important development since the vast majority of Chinese consumers normally purchase an automobile for 100% cash. The new regulations will open the automobile market significantly for the fastest growing economy. While this development is an obvious positive for the automobile manufacturer, such as GM and Ford, it will also benefit the tire manufacturers such as Goodyear Tire.

At its current price of $7.40 per share, we believe the price does not reflect the improving environment for Goodyear Tire and thus we view the stock as undervalued. We are establishing a target price of $13.00 per share.



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