On Feb 24, 2014, we issued an updated research report on
American Axle & Manufacturing Holdings Inc.
). The company should benefit from new and incremental businesses
to be launched, increased manufacturing in low-cost countries,
efforts to diversify the customer base and the rising cash
balance. However, growing debt and pricing pressure by original
equipment manufacturers (OEMs) remain causes for concern.
American Axle reported fourth-quarter 2013 adjusted earnings
of 70 cents per share, surpassing the Zacks Consensus Estimate of
51 cents. Earnings per share rebounded from a loss of 2 cents in
the comparable quarter of 2012 (excluding special items).
Adjusted net income jumped to $54.2 million from adjusted loss of
$1.7 million reported in the fourth quarter of 2012.
American Axle generated positive earnings surprise in three of
the trailing four quarters with an average beat of 22.38%. The
company's efforts at widening its customer base are generating
incremental revenues. Apart from
General Motors Company
) and Chrysler, the company supplies driveline systems and other
Ford Motor Co.
) and various other OEMs.
Additionally, American Axle's cash balance has improved. The
company is also undergoing a significant expansion of its
manufacturing footprint in Asia, where growing demand for
vehicles is enhancing production volumes. Further, the company's
new and additional business backlog to be launched between 2014
and 2016 is valued at $900 million in annual sales. The new
business should help the company maintain compounded annual
growth rate of about 11-12%, double the expected industry growth
rate, till 2015.
However, major OEM customers constantly demand price
concessions from suppliers. This has been affecting the company
negatively. Moreover, American Axle's long-term debt increased to
$1.6 billion as of Dec 31, 2013, from $1.5 billion as of Dec 31,
Since the company earns a significant portion of its revenues
form products supporting rear-wheel-drive (RWD) light truck and
SUV platforms in North America, the presence of factors hampering
sales and output levels of these light trucks and SUVs is a
Currently, American Axle holds a Zacks Rank #4 (Sell).
AMER AXLE & MFG (AXL): Free Stock Analysis
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