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American Axle & Manufacturing (AXL) Up 10.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) . Shares have added about 10.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AXL due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

American Axle’s Q1 Earnings & Revenues Beat Estimates

American Axle posted adjusted earnings of 98 cents per share for first-quarter 2018, beating the Zacks Consensus Estimate of 81 cents. In first-quarter 2017, adjusted earnings were $1.03.

During the quarter under review, the company reported net income of $89.4 million or 78 cents per share compared with $78.4 million or 99 cents per share in the year-ago quarter.

Revenues increased to $1.86 billion in the reported quarter from the year-ago figure of $1.05 billion. The top line also surpassed the Zacks Consensus Estimate of $1.76 billion. Realization of new business backlog and sustained strength in end markets led to the rise in year-over-year sales.

American Axle’s SG&A (Selling, General & Administrative) expenses were $97.3 million for the reported period in comparison with $81.2 million in the prior-year quarter.

Gross profit increased to $316.3 million in first-quarter 2018 from $210.7 million in the prior-year quarter. Operating income increased to $175.8 million from $111.9 million a year ago.

Financial Position

American Axle had cash and cash equivalents of $340.7 million as of Mar 31, 2018, down from $376.8 million as of Dec 31, 2017. Net long-term debt was $4 billion as of Mar 31, 2018, almost in line with full-year 2017.

Cash flow from operations in first-quarter 2018 was $66.9 million in comparison with the prior year's figure of $62.3 million. At the reported quarter-end, American Axle’s adjusted free cash outflow was $41.7 million compared with an inflow of $60.5 million for the same period last year. The figure excluded the impact of cash payments for restructuring and acquisition-related costs, settlements of pre-existing accounts payable balances, with acquired entities and interest payments upon the settlement of acquired company debt.

Divestment

American Axle sold the aftermarket business of its Powertrain unit to Hidden Harbor Capital Partners in April. Cash proceeds from sales were roughly $50 million. The impact of this will be recorded in second-quarter 2018 results.

2018 Outlook

For 2018, the company reiterated its sales expectation to be roughly $7 billion, mostly depending on its anticipated program launches and an assumption that the U.S. industry sales on a seasonally adjusted annualized rate (SAAR) is expected to be 16.8-17 million light-vehicle units in 2018.

The company also reiterated its anticipated adjusted earnings before income taxes, depreciation and amortization (EBITDA) margin to be 17.5-18% of sales in 2018. Also, American Axle’s guidance for adjusted free cash is 5% of sales in 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.

American Axle & Manufacturing Holdings, Inc. Price and Consensus

VGM Scores

At this time, AXL has an average Growth Score of C, however its Momentum is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.

Outlook

AXL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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