Why Is American Axle (AXL) Up 105.4% Since Last Earnings Report?

It has been about a month since the last earnings report for American Axle & Manufacturing (AXL). Shares have added about 105.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is American Axle 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 Q1 Earnings & Sales Surpass Estimates

American Axle posted first-quarter 2020 adjusted earnings of 20 cents per share, as against the Zacks Consensus Estimate of loss of 16 cents on higher-than-anticipated revenues. The bottom-line figure, however, slumped 44.4%, year on year.

The company reported net loss of $501.3 million in the quarter, as against the net income of $41.6 million recorded in the year-ago period.

The Detroit-based global automotive parts supplier reported revenues of $1,344 million, beating the Zacks Consensus Estimate of $1,297 million. Revenues, however, came in lower than the year-ago figure of $1,719 million.

Segmental Highlights

The firm’s Driveline segment recorded sales of $1,031.7 million, down 11.5% year over year. The unit EBITDA also declined 2.4% from the prior-year quarter to $139.3 million. The figure missed the Zacks Consensus Estimate of $150 million.

The company’s Metal Forming business generated revenues of $422.3 million, lower than the year-ago figure of $483.3 million. Its EBITDA also decreased $10.4 million year on year to $74 million. The reported figure also missed the Zacks Consensus Estimate of $78 million.

Costs & Financial Position

American Axle’s SG&A (selling, general & administrative) expenses totaled $90.3 million in first-quarter 2020, down from the $90.7 million incurred in the prior-year period.

For the three-month period ended Mar 31, 2020, the company’s adjusted free cash flow (FCF) was $83.3 million compared with the negative adjusted FCF of $188.5 million witnessed in the year-earlier period. Capital spending in the quarter came in at $69.2 million, down from the year-ago quarter’s $123.9 million.

As of Mar 31, 2020, American Axle had cash and cash equivalents of $682.7 million, compared with $532 million as of Dec 31, 2019. The company had net long-term debt of $3,511.7 million as of Mar 31, 2020, down from $3,612.3 million as of Dec 31, 2019.

2020 Outlook

American Axle suspended the 2020 guidance as it expects the coronavirus pandemic’s impact to strain its operations in the days to come.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -33.62% due to these changes.

VGM Scores

Currently, American Axle has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Axle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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