As investors navigate a busy first quarter of 2024, the automotive industry remains in focus amid a period of significant transformation and growth. While legacy Detroit giant Ford Motor Company (F) is flying high on stronger-than-forecast earnings and a special dividend payment, once-dominant Tesla (TSLA) shares are down sharply in 2024 after last month's uninspiring forecast from management.

But whether you prefer to track the moves in legacy auto stocks, electric vehicle (EV) stocks, or both, it's Goodyear Tire & Rubber Company (GT) that anchors all the action in the industry - and GT recently made headlines of its own, with significant corporate changes and strategic moves that could signal a buying opportunity for investors.

After activist investor Elliott Investment Management acquired a stake in Goodyear last May - and snagged a few board seats in July - the company has embarked on an ambitious restructuring plan aimed at boosting efficiency and shedding non-core assets. Most recently, Goodyear named former Stellantis (STLA) exec Mark Stewart as its new CEO, replacing longtime company leader Richard Kramer. 

Notably, Goodyear is still exploring strategic alternatives for some of its businesses, which could unlock value going forward - and at current levels, the shares look pretty cheap. Here's a closer look.

Goodyear Tire Stock Outperforms the Market

Goodyear Tire & Rubber Company is one of the world's largest tire manufacturers, selling tires for cars, trucks, buses, planes, bikes, and heavy machinery worldwide through tire shops, distributors, and big retail chains. Valued at $3.9 billion by market cap, the company's portfolio of brands include Goodyear, Kelly, and the up-for-strategic-review Dunlop.

It was a volatile year for GT in 2023, but the stock has now filled in the bull gap caused by investors' excitement over the initial Elliott Management letter. GT is now up 22% over the past 52 weeks - slightly outperforming the broader S&P 500 Index ($SPX).

Despite the solid price action, GT is relatively cheap at current levels. The stock's forward price/sales ratio is 0.19 - well below the consumer discretionary sector median of 0.90, and its own five-year historical average of 0.21. Likewise, the price/book of 0.77 is a discount to the sector median of 2.55 and GT's historical average of 0.81.

Plus, the price/earnings to growth (PEG) ratio is 1.28, which compares favorably to the sector median of 1.65.

In other words, Goodyear stock looks fairly valued right now, both compared to its industry peers and its own historical valuation multiples.

Can Goodyear Beat on Earnings?

In its latest earnings report, released last November, Goodyear topped bottom-line expectations by reporting EPS of $0.36, though quarterly revenue of $5.14 billion fell short of consensus estimates.

Looking ahead, the company will report Q4 results on Feb. 12. Goodyear has already warned that the quarter will be negatively impacted by a fire last August at one of its Poland facilities. Wall Street is expecting an adjusted profit of $0.36 per share for the fourth quarter, on average.

The tire company's lackluster revenue growth will also likely be in focus, particularly after last quarter's miss. From $19.54 billion in fiscal year 2013, Goodyear expanded its top line to all of $20.80 billion by fiscal 2022. Ahead of next week's report, the consensus is calling for FY 2023 revenue of $20.38 billion, which is projected to rise to just $20.98 billion by 2024.

Investors will also be looking for updates on Goodyear's strategic initiatives and growth prospects, which include restructuring and optimization plans across its Asia-Pacific and EMEA operations. Under the “Goodyear Forward” plan outlined in November, the company is targeting $2 billion in gross proceeds through strategic asset reviews, $1.3 billion in benefits from margin expansion, and a $1.5 billion reduction in debt through 2025.

Analysts Say GT Stock Is a “Buy”

Wall Street analysts are generally optimistic about Goodyear Tire & Rubber Company stock, giving it a “moderate buy” consensus rating. Out of the 7 analysts in coverage, 2 are gung-ho with a “strong buy” rating, while the other 5 are playing it cool with a “hold” rating. 

The average analyst price target sits at $16.97, hinting at a potential 24.5% upside from current levels.

What's the Bottom Line on GT Stock?

Goodyear Tire & Rubber Company (GT) stands out as an undervalued stock, though it's not without some risk as the company attempts to execute a turnaround - particularly with a pivotal earnings report coming up in just a few days. However, for those investors who think the tire titan is well-positioned to deliver on its plans for wider margins and a more focused, premium portfolio of brands, GT stock could be a bargain worth scooping up around current prices.