This automotive supplier beat earnings estimates by four cents in the last quarter and analysts have increased the company’s estimates six times in the past 30 days.
American Axle & Manufacturing Holdings Inc. (AXL)
from Ford Equity Research Report
Axle & Manufacturing Holdings (AXL) is a supplier to the automotive industry. The company manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drivewheels. The company’s driveline, drivetrain and related products include axles, driveheads, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, transmission parts, electric drive systems and metal-formed products.
We project that American Axle will strongly outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.
The company has enjoyed a very positive trend in earnings per share over the past 5 quarters and while recent estimates for the company have been mixed, AXL has posted better than expected results. While American Axle & Manufacturing Holdings Inc.'s earnings have increased from $2.40 to an estimated $2.49 over the past 5 quarters, they have shown strong acceleration in quarterly growth rates when adjusted for the volatility of earnings. Analyst forecasts have recently been raised.
American Axle’s operating earnings yield of 12.5% ranks above 97% of the other companies in the Ford universe of stocks, indicating that it is undervalued. Based on operating earnings yield, the company is undervalued when compared to all of the companies we cover.
American Axle’s stock price is up 8.6% in the last 12 months, down 19.9% in the past quarter and down 4.4% in the past month. This historical performance should lead to above average price performance in the next one to three months.
Richard Segarra, CFA, Ford Equity Research Report, www.fordequity.com, 800-842-0207, August 6, 2015