American Axle profit beats Street

American Axle profit beats Street

Stock Market Predictions

(Global Markets) - U.S. auto parts maker American Axle and Manufacturing Holdings Inc (AXL.N) posted a fourth-quarter profit that beat market expectations on the back of higher margins.

The company, which makes axles and other driveline components for trucks and larger vehicles, also reaffirmed its forecasts for 2012 sales and margins. Shares were up 2.4 percent in afternoon trading.

"We're seeing signs of strengths in the economy," Chief Financial Officer Michael Simonte said in a telephone interview.

"The automotive industry will continue to outgrow the overall economy in our judgment," he added. "There's a substantial amount of replacement demand for vehicles that are aging well beyond historical levels."

Simonte said the company now sees the high end of its expected range of 13 million to 13.5 million for U.S. 2012 light vehicle sales as the most probable outcome.

American Axle said it was quoting over $1 billion of potential new incremental business from 2013 to 2016, and 90 percent of this expected business would come from non-General Motors Co (GM.N) business.

American Axle has been pushing to diversify its business away from GM, which accounts for more than 70 percent of its sales. For the quarter, non-GM business grew 11 percent to $175 million.

American Axle had previously said its goal is to reduce dependence on GM to 50 percent by 2015.

Analyst Matthew Stover of Guggenheim Securities said the near-term story for American Axle is that the company does not have the European risk that other companies have but has leverage to the new GM truck program in 2013.

American Axle posted gross margins for the fourth quarter of 17.5 percent.

"The quarter's strong margin performance highlights the company's capability to continue growing profitability, in our view," Citigroup analyst Itay Michaeli said in a note.

For the quarter, the company reported adjusted earnings of 47 cents a share, compared with analysts' estimate of 39 cents a share, according to Thomson Global Markets I/B/E/S. Most of the outperformance was due to a low tax rate, analysts said.

Net sales rose 4 percent to $605.6 million.

It reaffirmed it expects 2012 sales in the range of $2.8 billion to $2.9 billion and earnings before interest, taxes, depreciation and amortization in the range of 14 percent to 14.5 percent of sales.

Shares of the Detroit-based company were up 29 cents at $12.62 in afternoon trading on the New York Stock Exchange. The stock has almost doubled since touching a year low in October.

(Additional reporting by Ben Klayman in Detroit; Editing by Hezron Selvi, Maju Samuel and Steve Orlofsky)

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Good times roll for auto suppliers

Good times roll for auto suppliers

Stock Market Predictions

DETROIT (Global Markets) - Major auto suppliers blew past profit expectations on Friday, suggesting the recovery in the global auto market remains strong despite rising oil prices and the disaster in Japan.

Goodyear Tire & Rubber Co (GT.N), powertrain maker American Axle and Manufacturing Holding Inc (AXL.N) and Lear Corp (LEA.N), which makes seating and electrical power management systems, posted first-quarter earnings that easily exceeded Wall Street estimates on improving global demand.

"What we're seeing from these results is the volumes are significantly higher and therefore the recovery in the auto industry is gaining momentum," said Tim Ghriskey, chief investment officer with Solaris Asset Management.

"Clearly, the sales are doing well and the consumer is replacing older vehicles," added Ghriskey, who has owned auto stocks in the past and still follows the sector closely.

Shares of Goodyear, American Axle and Lear were up 10.9 percent, 3.3 percent and 2.5 percent, respectively, in morning trading.

Lear cited a 5 percent increase in global auto production in the first quarter compared with a year earlier. Demand grew around the world, offsetting a 32 percent production decline in Japan due to the earthquake and tsunami last month.

Friday's earnings reports continued a strong week for the sector, underlined by Ford Motor Co's (F.N) better-than-expected profit.

Other suppliers whose results topped expectations this week included BorgWarner Inc (BWA.N), Federal-Mogul Corp (FDML.O) and Dana Holding Corp (DAN.N).

Dealer groups -- AutoNation Inc (AN.N), Penske Automotive Group Inc (PAG.N), Asbury Automotive Group Inc (ABG.N) and Group 1 Automotive Inc (GPI.N) -- also posted strong profits, although many warned the Japanese crisis would crimp vehicle inventories on their lots.

"Obviously, it's all about volume," Morningstar analyst David Whiston said. "With a lower fixed cost and a better top line, it's not a surprise to see earnings doing so well."

While he still expects some choppiness due to the Japanese crisis, he said the industry's recovery remains in place.

David Silver, analyst with Wall Street Strategies, cautioned against exuberant expectations, however.

"I wouldn't call it a party right now. It's more of a get-together," he said. "The profitability of the North American automakers is much improved from 2007 and 2008, but the Japan disaster is an overhang."

Silver expects more of drag on automaker and supplier earnings later this year.

That squared with comments from General Motors Co (GM.N) Chief Executive Dan Akerson, who said on Thursday that the Japanese crisis was a "second-quarter event.

Akerson, like Ford CEO Alan Mulally, said the disaster in Japan was not likely to have a great impact on earnings.

Silver also said the European market will be weak for the year, while Ghriskey voiced concern about rising raw material costs.

(Additional reporting by Bernie Woodall; editing by John Wallace)

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