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American Axle (AXL) Down 25.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
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A month has gone by since the last earnings report for American Axle & Manufacturing (AXL). Shares have lost about 25.7% in that time frame, underperforming the S&P 500.

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

American Axle Q1 Earnings Top Estimates, Revenues Miss

American Axle posted adjusted earnings of 36 cents per share in the first quarter of 2019, beating the Zacks Consensus Estimate of 35 cents. In first-quarter 2018, adjusted earnings were 98 cents.

During the quarter under review, the company reported net income of $41.6 million compared with $89.4 million a year ago. Improved operational performance along with supporting customers on important program launches aided American Axle to witness an increase in earnings.

Sales increased to $1.72 billion, marking a plunge from the year-ago figure of $1.86 billion. The top line missed the Zacks Consensus Estimate of $1.74 billion.

American Axle’s SG&A (Selling, General & Administrative) expenses were $90.7 million for first-quarter 2019 in comparison with $97.3 million in the prior-year quarter.

Gross profit decreased to $222 million in first-quarter 2019 from $316 million a year ago. Operating income declined to $94 million from $176 million.

Financial Position

American Axle had cash and cash equivalents of $252 million as of Mar 31, 2019, down from $476 million as of Dec 31, 2018. Net long-term debt was $3.7 billion as of Mar 31, 2019, similar to the figure recorded on Dec 31, 2018.

Cash outflow from operations for the first three months of 2019 was $80.2 million in comparison with the prior year’s inflow of $67 million. At the end of the first three months of 2019, American Axle’s adjusted free cash outflow was $204 million compared with $63.5 million for the same period of last year.

Outlook

In second-quarter 2019, American Axle projects sales of $1.75-$1.8 billion and adjusted EBITDA of $270-$280 million.

For 2019, the company expects sales of $7.3-$7.4 billion and adjusted EBIDTA of $1.2-$1.25 billion.

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 -34.45% due to these changes.

VGM Scores

At this time, American Axle has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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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