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American Axle's Shares Decline as Q2 Earnings Miss Estimates

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Share price of American Axle and Manufacturing Holdings Inc. (AXL - Free Report) declined 4.7% to close at $17.52 on Aug 1, after the company reported second-quarter 2014 earnings of 67 cents, which missed the Zacks Consensus Estimate by 4 cents. Meanwhile, earnings increased 97% year over year from 34 cents. Net income jumped an astounding 102.3% to $52.2 million from $25.8 million reported in the second quarter of 2013.
The year-over-year upside in profits was driven by strong sales and increased production volumes of products which support the North American light vehicle segment.


Revenues went up 18.4% to $946.9 million from $799.6 million in the second quarter of 2013. The figure missed the Zacks Consensus Estimate of $982 million.

American Axle’s content-per-vehicle – dollar value of product sales supporting customers’ North American light truck and SUV programs – increased 5.5% to $1,640 from $1,554 in the year-earlier quarter. The company’s non-General Motors Company (GM - Free Report) sales rose 33.2% to $298.1 million from $223.8 million in the year-ago quarter. The year-over-year improvement in revenues was driven by higher sales to support the production of Chrysler's all-new Jeep Cherokee and heavy-duty Ram full-size pickup trucks and derivatives.

Gross profit improved 21.9% to $149 million or 15.7% of sales in second-quarter 2014 from $122.2 million or 15.3% of sales in the year-ago quarter. Meanwhile, operating income surged 41.8% to $87.5 million or 9.2% of sales from $61.7 million or 7.7% of sales a year ago.

Financial Position

American Axle had cash and cash equivalents of $128.9 million as of Jun 30, 2014, down from $154 million as of Dec 31, 2013. Long-term debt stood at $1.54 billion as of Jun 30, 2014, down from $1.56 billion as of Dec 31, 2013.

Cash flow from operations in the first half of 2014 came in at $82.4 million compared with $33.2 million in the same period of 2013. Net capital spending of the company stood at $95.4 million as against $100.6 million a year ago. Therefore, American Axle used free cash of $13 million in the period compared with $67.4 million in the first half of 2013.

Our Take

American Axle is a leading supplier of driveline systems, modules and components for the light vehicle market.  The company is poised to benefit from a strong sales environment and product launches with the new advanced driveline technologies. Also, the product launches will diversify the company’s business and drive profits along with consistent free cash flow generation. Currently, American Axle holds a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the same industry are Tower International, Inc. (TOWR - Free Report) and Magna International Inc. (MGA - Free Report) . Both the companies sport a Zacks Rank #1 (Strong Buy).

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