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What's in the Offing for American Axle (AXL) This Earnings Season?

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American Axle & Manufacturing Holdings (AXL - Free Report) is slated to release second-quarter 2021 results on Jul 30, before the opening bell. The Zacks Consensus Estimate for the quarter’s loss is pegged at 3 cents per share on revenues of $1.16 billion.

This automotive parts supplier registered robust earnings in the last reported quarter on higher-than-expected EBITDA across both of the company’s segments.

American Axle beat estimates in each of the preceding four quarters, the average surprise being 164.7%. This is depicted in the chart below:

Trend in Estimate Revisions

The Zacks Consensus Estimate for American Axle’s second-quarter earnings per share witnessed a downward revision of four cents to a loss of 3 cents in the past seven days. Nonetheless, this compares favorably with the year-ago quarter’s loss of $1.79 per share, indicating a 98.3% surge, year on year. Also, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year jump of a whopping 125.3%.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for American Axle for the to-be-reported quarter, as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. However, this is not the case as elaborated below.

Earnings ESP: American Axle has an Earnings ESP of -34.62%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: American Axle currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Setting the Tone

Demand for vehicles in second-quarter 2021 was strong amid preference for personal mobility, low interest rates and government stimulus. This is likely to have buoyed demand across both the segments for American Axle.

The Zacks Consensus Estimate for the Driveline segment’s quarterly net sales is pegged at $1,013 million, suggesting a jump from the $404 million reported in the year-ago period. Moreover, the consensus estimate for EBITDA from the said segment is pinned at $158 million, indicating a reversal of the loss of $31.2 million seen in the prior-year quarter.
The consensus mark for the Metal Forming segment’s quarterly net sales is pinned at $431 million, calling for an increase from the year-earlier quarter’s $150 million. Moreover, the consensus estimate for the segment’s EBITDA is pinned at $60 million, suggesting improvement from the prior-year quarter’s loss of $20.9 million.  

However, American Axle’s sales in the second quarter might have been affected by the global semiconductor chip dearth grappling the auto sector. Also, higher manufacturing costs due to material freight and inflationary pressures, along with program-launch costs, are expected to have dented American Axle’s profit margin for the June-end quarter. Further, restructuring and acquisition-related costs and research and development costs are other cost headwinds for the company. These incremental costs are likely to have hurt American Axle’s bottom line during the quarter under discussion.

Stocks With Favorable Combinations

Here are a few stocks in the auto sector which are worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

General Motors (GM - Free Report) has an Earnings ESP of +19.83% and flaunts a Zacks Rank #1, at present. It is scheduled to report earnings results on Aug 4.

Tenneco (TEN - Free Report) has an Earnings ESP of +1.2% and currently carries a Zacks Rank #3. The company is slated to release quarterly numbers on Aug 5.

Lear Corporation (LEA - Free Report) has an Earnings ESP of +3.05% and carries a Zacks Rank of 3, currently. The company is set to announce quarterly figures on Aug 6.