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Goodyear Tire Goes Flat on Venezuela Hit

Goodyear Tire & Rubber watched its shares tumble on the final day of the trading week amid analyst outlook revisions.
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NEW YORK (

TheStreet

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Goodyear Tire & Rubber

(GT) - Get Report

watched its shares tumble on the final day of the trading week amid analyst outlook revisions.

Goodyear Tire & Rubber stock was lost 5.9% to close the trading day Friday at $13.46.

Goodyear on Thursday reported earnings that beat estimates on a per share basis, but its executives spoke about the negative impact of the Venezuelan currency devaluation, leading analysts to reduce estimates for 2010.

"We reduce our 2010 EPS (earnings per share) estimate by 9 cents to $1.13, as currency and political developments in Venezuela should hurt profits," Standard & Poor's equity analyst Efraim Levy noted. S&P has also reduced its Goodyear price target by $2 to $17.

Levy noted that the value of cash and other assets were reduced by the currency devaluation, while noting that all this should be partly offset by greater-than-previously-expected cost cutting and lower pension costs.

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The Venezuelan government on Jan. 8 announced that it would devalue its currency with a dual exchange system that involved changing the rate from 2.15 Bolivar to the dollar to 2.6 for essential goods, and 4.3 for the non-essentials.

"While we continue to evaluate the impact of this devaluation and the dual exchange regime, we expect to record a charge in Q1 (first quarter) for the re-measurement of our balance sheet," Goodyear's chief financial officer Darren Wells said during an earnings conference, according to a Seeking Alpha transcript.

"Calculated at the less favorable of the two rates, this charge would be about $150 million net of tax and our 2009 year end liquidity would be about $4.5 billion on a pro forma basis," Wells said, according to the transcript.

Goodyear reported adjusted earnings of 14 cents a share in the fourth quarter, beating the 9 cent loss estimated by Wall Street.

-- Reported by Andrea Tse in New York

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