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American Axle (AXL) Beats on Q3 Earnings, Misses Revenues

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American Axle & Manufacturing Holdings Inc.’s (AXL - Free Report) shares plunged 17.6% to close at $13.68 on Nov 3, after the company reported modest revenue growth and reduced its sales guidance for 2016. American Axle posted earnings of 78 cents per share for the third quarter of 2016 that beat the Zacks Consensus Estimate of 77 cents. Also, earnings were flat with the year-ago quarter.

The company reported net income of $61.7 million in the third quarter of 2016, up from $60.9 million in the year-ago quarter.

Revenues improved marginally to $1 billion in the reported quarter from $971.6 million a year ago. However, the top line fell marginally short of the Zacks Consensus Estimate of $1.02 billion.

 

American Axle’s content-per-vehicle – dollar value of product sales supporting customers’ North American light truck and sport utility vehicle (“SUV”) programs – dropped to $1,612 from $1,622 in third-quarter 2015. The company’s non-General Motors Company (GM - Free Report) sales declined to $307.7 million from $321.6 million in the year-ago quarter.

Gross profit increased to $181.2 million (18% of sales) in third-quarter 2016 from $158.3 million (16.3% of sales) in the prior-year quarter. Meanwhile, operating income improved to $101.3 million from $92.8 million a year ago.

AMER AXLE & MFG Price, Consensus and EPS Surprise

 

AMER AXLE & MFG Price, Consensus and EPS Surprise | AMER AXLE & MFG Quote

Financial Position

American Axle had cash and cash equivalents of $433.9 million as of Sep 30, 2016, up from $282.5 million as of Dec 31, 2015. Long-term debt was $1.4 billion as of Sep 30, 2016, compared to $1.38 billion at year-end 2015.

Cash flow from operations in the first nine months of 2016 was $291 million, compared with $268.1 million in first-nine months 2015. Net capital spending of the company was $155.2 million in first-nine months 2016, compared with $131.9 million in the year-ago period. Therefore, American Axle’s free cash flow was $135.8 million in the said period compared with $136.2 million a year ago.

2016 Outlook

For 2016, sales are expected to be $3.95 billion, down from $4 billion expected earlier but marginally higher than $3.9 billion recorded in 2015.

Earnings before income taxes, depreciation and amortization (EBITDA) margin will likely be in the range of 15.25%–15.5% in 2016, revised from the prior estimate of 15%–15.5%.

For 2016, American Axle expects free cash flow of $160 million. In addition, capital spending will be around 6% of sales this year.

Zacks Rank

Currently, American Axle carries a Zacks Rank #3 (Hold). Some better-ranked auto stocks include America's Car-Mart Inc. (CRMT - Free Report) and Rush Enterprises, Inc. (RUSHA - Free Report) .

America's Car-Mart has witnessed positive estimate revisions over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 13.20%.

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