It has been about a month since the last earnings report for American Axle & Manufacturing Holdings, Inc.AXL . Shares have lost about 5.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
American Axle Q2 Earnings Beat Estimates, Gain Y/Y
American Axle & Manufacturing Holdings posted adjusted earnings of $0.99 per share for the second quarter, thereby beating the Zacks Consensus Estimate of $0.86. Earnings increased from $0.90 recorded in the second quarter of 2016. The reported figure excludes the impact of debt-restructuring, acquisition costs and non-recurring items, including the tax effect.
The company reported net income of $66.2 million or $0.59 per share in the second quarter of 2017 compared with $71 million or $0.90 per share in the year-ago quarter.
Revenues increased to $1.76 billion in the reported quarter from the year-ago figure of $1.03 billion. However, the top line marginally missed the Zacks Consensus Estimate by 0.2%.
For the reported period, American Axle's SG&A (Selling, General & Administrative) expenses were $105.6 million, in comparison to $78.7 million in the prior-year quarter.
Gross profit increased to $316.4 million in second-quarter 2017 from $191.4 million in the prior-year quarter. Operating income significantly increased to $134.3 million from $11.5 million a year ago.
In Apr 2017, the company completed the acquisition of Metaldyne Performance Group Inc. This buyout will help American Axle reduce its reliance on General Motors, one of its largest customers.
American Axle had cash and cash equivalents of $490.6 million as of Jun 30, 2017, up from $481.2 million as of Dec 31, 2016. Long-term debt was $4.2 billion as of Mar 31, 2017 compared with $1.4 billion on Dec 31, 2016.
Cash flow from operations in second-quarter 2017 was $150.9 million. For the same quarter a year ago, net capital spending of the company was hugely $348.9 million. American Axle's free cash flow for the second quarter was $47.9 million, whereas adjusted free cash flow for the same period was way above at $141.6 million, excluding the impact of cash payments for restructuring and acquisition-related costs and settlements of pre-existing accounts payable balances with acquired entities.
For fiscal 2017, the company reiterated its sales expectation to be approximately $6.1 billion, higher than $3.95 billion recorded in 2016. This projection is based on the launch of programs in the company's new and incremental business backlog. The company also assumes that the U.S. industry sales on a seasonally adjusted annualized rate (SAAR) basis will be around 17 million light vehicle units in 2017.
Earnings before income taxes, depreciation and amortization (EBITDA) margin will likely be in the range of 17-18% in 2017. American Axle expects adjusted free cash to be approximately 5% of sales in 2017. In addition, capital spending will be around 8% of sales this year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
American Axle & Manufacturing Holdings, Inc. Price and Consensus
At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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