American Axle Impacted by Strike

American Axle's (AXL - Analyst Report) focus on diversification and geographical expansion is helping the company to grow. Weak SUV demand is greatly affecting AXL's sales. Furthermore, high commodity costs and pricing pressure from OEMs remain causes for concern.

The company is also in the midst of a major strike that will impact earnings. Thus, we rate the stock a Hold and set a six-month target price of $23.50. The stock does have some downside risk at this time, as it trades at 1.26x book value. We expect a resolution to the strike soon.

Currently, AXL's stock is trading at approximately 9.6x our 2009 EPS estimate of $2.25. AXL's focus on improving its product mix, diversification of its client base, and outsourcing to low-cost countries are some of the positives associated with the stock. However, due to production cuts by GM (GM), pricing pressure from OEMs, and high commodity prices, we rate the stock a Hold. Using our fiscal year 2009 earnings estimate and a forward multiple of 10.4x, we value the stock at $23.50.

Read the full analyst report on AXL.

Read the full analyst report on GM.