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American Axle (AXL) Moves 8.3% Higher: Will This Strength Last?

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American Axle & Manufacturing (AXL) shares ended the last trading session 8.3% higher at $12.87. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 23.1% gain over the past four weeks.

Economic recovery buoyed by widespread vaccination drive and massive fiscal stimulus has been boosting the demand for vehicles, thereby driving the share price of this auto equipment provider. In fact, shares of American Axle hit a 52-week high yesterday. Seemingly, positive updates by the firm’s major customer and U.S. auto giant General Motors are likely to have resulted in the rally. Yesterday, General Motors announced plans of ramping up production and deliveries despite the global chip crunch.

Considering how important a customer General Motors is to American Axle, shares of the latter have likely gotten a boost. With the effects of COVID-19 subsiding, people are expected to opt for discretionary spending on vehicle purchases, which bodes well for the automotive equipment supplier. Further, collaboration with Inovance and cREE Automotive is also set to bolster American Axle’s prospects and fuel its electrification revenues. Considering the tailwinds, we expect that there is immense upside left in the stock.

This maker of auto parts is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of +103.4%. Revenues are expected to be $1.24 billion, up 140.4% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For American Axle, the consensus EPS estimate for the quarter has been revised 14.3% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on AXL going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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