Goodyear's stock price jumped 2.12% to $15.42 a share after Nomura initiated coverage with a buy rating and a $20 target price, seeing upside potential of more than 30%.
Nomura analyst Anindya Das cited the stock's inexpensive valuation, the company's share of the aftermarket tire sector, and a projected increase in profitability in 2020 amid a major restructuring of its plants in the United States, according to published reports.
"Goodyear is an attractive, defensive stock within the auto and auto-parts space … at a time when the economic growth outlook for 2020 is somewhat muddled," the Nomura analyst wrote.
Goodyear earlier this year announced plans to restructure its manufacturing plants in the United States based on an initiative the tire maker has already rolled out in Germany.
Goodyear has boosted automation at its German plants, while shifting production towards higher-cost, premium tires. The overhaul, which will cut 1,100 jobs, is expected to boost earnings by $60 million to $70 million by 2022, the company has said.
Goodyear executives have indicated they expect an even bigger payoff from their revamp of the company's plants in the U.S., which remains the company's largest market.
"We are working on a significant restructuring plan to reduce low-value, high-cost capacity in the U.S.," Darren Wells, Goodyear's CFO told analysts on a July 26 conference call, according to Rubber&PlasticsNews. The restructuring will produce savings "at least as high," as the company is seeing at its German plants, the Goodyear CFO said.