American Axle T-Boned by SUVs

American Axle's (AXL - Analyst Report) focus on diversification and geographical expansion is helping the company to grow. The company's recent backlog of new and incremental business, to be launched through 2009 to 2013, is $1.4 billion in future annual sales.

Weak SUV demand is greatly affecting AXL's sales. Furthermore, high commodity costs and pricing pressure from OEMs remain causes for concern. The company recently reached a resolution with the United Auto Workers (UAW) to end the 11-week-long strike at its five plants. Thus, we rate the stock a Hold.

Currently, AXL's stock is trading at approximately 8.4x 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 8.7x, we value the stock at $19.50.

Read the full analyst report on AXL