American Axle Q4 Earnings Beat Ests

Zacks

American Axle and Manufacturing Holdings Inc. (AXL) reported fourth-quarter 2013 adjusted earnings of 70 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. However, earnings per share rebounded from a loss of 2 cents per share in the comparable quarter of 2012 (excluding special items). Adjusted net income jumped to $54.2 million from adjusted loss of $1.7 million reported in the fourth quarter of 2012.

Including debt refinancing and redemption costs in the reported quarter, the company reported net income of $29.8 million or 39 cents per share, compared with $319.9 million or $4.21 per share in the fourth quarter of 2012. The year-ago quarter includes the favorable impact of a $337.5 million or $4.44 per share benefit related to the reversal of valuation allowance against net federal deferred tax assets for entities in the United States.

Revenues went up 12.8% to $831.3 million compared with $736.7 million in the fourth quarter of 2012.  However, it missed the Zacks Consensus Estimate of $872 million.

American Axle’s content-per-vehicle – dollar value of product sales supporting North American light truck and SUV programs – increased 4.3% to $1,579 from $1,514 in the fourth quarter of 2012. The company’s non-General Motors Company (GM) sales increased 37.2% to $280.1 million from $204.1 million in the year-ago quarter.

Gross profit improved 51.1% to $126.9 million or 15.3% of sales in fourth-quarter 2013 from $84 million or 11.4% in the year-ago quarter. Meanwhile, operating income surged 257% to $66.4 million or 8% of sales from $18.6 million or 2.5% of sales a year ago.

2013 Results

American Axle recorded adjusted earnings of $135 million or $1.76 per share in 2013, beating the Zacks Consensus Estimate of $1.55. In comparison, the company generated earnings of $428.1 million or $5.67 per share in 2012.

Including the impact of $36.8 million or 46 cents per share of debt refinancing and redemption costs and $5.8 million or 7 cents per share of other special items in the year, net income (on a reported basis) amounted to $94.5 million or $1.23 per share, compared with $367.7 million or $4.87 per share in 2012.

Revenues increased 9.4% to $3.21 billion from $2.93 billion in 2012, narrowly missing the Zacks Consensus Estimate of $3.24 billion.

Financial Position

American Axle had cash and cash equivalents of $154 million as of Dec 31, 2013, up from $62.4 million as of Dec 31, 2012. Long-term debt was $1.6 billion as of Dec 31, 2013, up from $1.5 billion as of Dec 31, 2012.

Cash flow from operations in 2013 was $223 million compared with cash outflow of $175.5 million in 2012. Net capital spending of the company was $218.7 million compared with $185.4 million in 2012. Therefore, American Axle had free cash flow of $4.3 million in the period compared with free cash use of $360.9 million in 2012.

Our Take

American Axle is a leading supplier of driveline systems, modules and components for the light vehicle market. The company makes axles, driveshaft and chassis components for light trucks, sport utility vehicles and passenger cars. Currently, it holds a Zacks Rank #4 (Sell).

Stocks that are worth considering at present, in the same industry include STRATTEC Security Corporation (STRT) and Gentex Corp. (GNTX). Both STRATTEC Security and Gentex carry a Zacks Rank #1 (Strong Buy).

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