NEW YORK (TheStreet) – Goodyear Tire & Rubber (GT - Get Report) has a lot going for it. Car sales are expected to rise to new highs this year and a record number of vehicles are hitting U.S. roads, in part aided by low gasoline prices that is making travel more affordable.

Wall Street is taking notice, issuing a "buy" rating on the leading U.S. tire manufacturer. And investors are feeling bullish too, pushing the stock to a new 52-week high at $28.77 on Tuesday. Yet, Goodyear's share price is far from recovering all that it lost in the Great Recession, unlike the stock market in general.

Goodyear's sluggish recovery is rooted in two problems that continue to linger.

One is China's persistence in flooding the U.S. tire market with cheap government-subsidized exports, which cuts into Goodyear's main market. Although U.S. tariffs are meant to alleviate that problem, these particular tire tariffs won't kick in until mid-year.

Europe, where Goodyear is the second largest tire maker, is another big problem for the company. With the region still suffering from a lackluster economy, Goodyear's sales have plummeted nearly 20% in two years to 60 million tires sold in 2013 from 74 million in 2011.

Still, there is reason to think this is not your tired tire company. Goodyear can work past these adversities. For starters, it closed a plant in France at the beginning of the year, which should help improve operating margins. Another factor that is helping Goodyear's operating margins is lower manufacturing costs, as the price for oil and rubber plummets. 

Additionally, on the sales side, the company's recent effort to market premium tires with stronger walls and better handling, along with higher prices, is paying off.

Goodyear's operating earnings are expected to clear $1 billion at the end of this year, marking four consecutive years of such a performance. 

The tire giant, in a move to show it has its operations in order, announced this year a $450 million share repurchase program, starting with $150 million shares this quarter. It also raised its dividend in July,  marking the first time in nearly 17 years.

Overall, Goodyear's shares are trading at a price-to-earnings multiple of about 14, roughly in the middle for the company. Its share price is also about 20% below its century high of $36, showing it has plenty of room to expand. Goodyear just needs to show investors it is truly a new and improved tire maker.


TheStreet Ratings team rates GOODYEAR TIRE & RUBBER CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GOODYEAR TIRE & RUBBER CO (GT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

You can view the full analysis from the report here: GT Ratings Report

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.