American Axle's Shares Rally as Q3 Earnings Grow 50% Y/Y
Share price of American Axle and Manufacturing Holdings Inc. (AXL) rallied 6% to close at $19.33 on Oct 31, after the company posted reasonably encouraging third-quarter 2014 numbers. While earnings of 63 cents were in line with the Zacks Consensus Estimate, the figure demonstrated an improvement of 50% from adjusted earnings of 42 cents in the third quarter of 2013. Net income surged an astounding 51.4% to $48.6 million from $32.1 million in the third quarter of 2013.
American Axle & Manufacturing Holdings, Inc - Earnings Surprise | FindTheBest
The year-over-year upside in profits was driven strong cash flow and enhanced profits backed by improved sales, productivity and operational stability.
Revenues went up 15.8% to $950.8 million from $820.8 million in the third quarter of 2013. The figure marginally surpassed the Zacks Consensus Estimate of $949 million.
American Axle’s content-per-vehicle – dollar value of product sales supporting customers’ North American light truck and SUV programs – increased 7.4% to $1,676 from $1,560 in the year-ago quarter. The content-per-vehicle also improved from $1,640 recorded in the second quarter of 2014. Meanwhile, the company’s non-General Motors Company (GM) sales rose 26.5% to $296.8 million from $234.7 million recorded in the year-ago quarter.
Gross profit improved 19% to $149.1 million or 15.7% of sales in third-quarter 2014 from $125.3 million or 15.3% of sales in the year-ago quarter. Meanwhile, operating income surged 26.1% to $85.1 million or 9% of sales from $67.5 million or 8.2% of sales a year ago.
Financial Position
American Axle had cash and cash equivalents of $219 million as of Sep 30, 2014, up from $154 million as of Dec 31, 2013. Long-term debt stood at $1.54 billion as of Sep 30, 2014, down from $1.56 billion as of Dec 31, 2013.
Cash flow from operations in the first nine months of 2014 totaled $231.6 million compared with $102.3 million in the same period of 2013. Net capital spending of the company stood at $147.7 million as against $172.4 million a year ago. Therefore, American Axle had free cash flow of $83.9 million in the period compared with $46.6 million in the first nine months 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 the recent launches of products integrated with the new advanced driveline technologies. Also, the product launches are expected to diversify the company’s business and drive profits along with generating consistent free cash flow. Currently, American Axle carries a Zacks Rank #3 (Hold).
Other automobile stocks worth considering include Gentex Corp. (GNTX) and STRATTEC Security Corporation (STRT). Both of the stocks sport a Zacks Rank #1 (Strong Buy).
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