Stock Preacher

American Axle & Manufacturing Holdings Inc. (NYSE: AXL)

American Axle & Manufacturing Holdings Inc. (AXL) engages in the design, engineering, testing, validation and manufacturing of driveline, drivetrain and chassis systems, related components and metal formed products for light trucks and buses, sport utility vehicles, crossover vehicles and passenger cars. AXL has established a foothold in the global driveline market, serving more than 100 customers on five continents. In North America, the Company is the principal supplier of driveline components to General Motors Corp. (GM) for its rear-wheel drive (RWD) light trucks and SUVs manufactured. In addition to locations in the United States (Michigan, New York, Ohio and Indiana), AAM also has offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, South Korea, Thailand and the United Kingdom.

Founded in 1994, the Company is headquartered in Detroit Michigan.

Source: Reuters.com

Financial Summary

The second quarter of 2009 proved to be a challenging period for AXL, hit by poor auto sales followed by GM and Chrysler’s announcements of extended production cuts. AXL’s net sales for the second quarter of 2009 came in at $245.6 million as compared to $490.5 million in the second quarter of 2008. The Company estimates that for the six months ended June 30, 2009, shutdowns reduced sales by approximately $203.6 million and operating income by $65.7 million. AXL currently supports North American light trucks and SUV programs for GM and Chrysler, which experienced a 57%-decrease in consumer production in the second quarter of 2009. Non-GM sales represented approximately 23.5% of total sales for the second quarter. The Company’s results in the second quarter were a net loss of $288.6 million, or $5.20 per share, versus a net loss of $644.3 million, or $11.89 per share, in the second quarter of 2008.

For the three months ended June 30, 2009, the Company incurred special charges, asset impairments and non-recurring operating costs of $191.8 million, or $3.46 per share. These charges were principally non-cash in the period and primarily related to asset impairments, hourly and salaried workforce reductions (including attrition programs and related statutory benefits), and the acceleration of BDP expense for UAW-represented associates at AAM’s Detroit, Michigan; Three Rivers, Michigan; and Cheektowaga, New York manufacturing facilities.

The Company reported second quarter 2009 asset impairments of $172.8 million, which include indirect inventory obsolescence and idled leased assets. These asset impairments were primarily related to the impact of new capacity rationalization actions taken by GM and Chrysler as a result of the automakers’ bankruptcy filings and subsequent reorganization plans, including extended production shutdowns for many of the product programs the Company currently supports.

The Company’s free cash flow, which is net cash provided by (or used in) operating activities less capital expenditures net of proceeds from the sales of equipment and dividends paid, was a use of $106.9 million in the first half of 2009, versus free cash flow use of $156.7 million in the first half of 2008. The recent results included the Company’s payment of $54.4 million for special charges and related costs, which primarily related to hourly and salaried attrition programs and related statutory benefits.

Source: Reuters.com

Analyst Consensus
In a recent poll, analysts expect shares of AXL to “Outperform.” This is the consensus forecast among eight polled investment analysts.

Source: http://markets.ft.com/tearsheets/analysis.asp?s=AXL:NYQ

Investment Highlights

Since its founding in 1994, AXL has grown to become a premier tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, design and validation of driveline and drivetrain systems and related components and chassis modules for trucks, sport utility vehicles (SUVs), passenger cars and crossover vehicles. Its driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. The Company’s driveline, drivetrain and related products include axles, chassis modules, propeller shafts, power transfer units, transfer cases, chassis and steering components, driving heads, crankshafts, transmission parts and metal-formed products. AXL is a multi-billion dollar company with a footprint that has grown from its original five North American manufacturing facilities to 32 locations around the globe serving more than 100 customers on five continents.

While operating amid increasingly challenging global market conditions, chairman and CEO Richard E. Dauch said that the Company remains focused on managing what it can control. Dauch said the extended production shutdowns by General Motors (GM) and Chrysler, which negatively impacted its recent quarterly results, required the Company to accelerate and expand restructuring actions to transition to new, reduced levels of customer demand and market requirements.

The “Cash for Clunkers” program, which was intended to provide economic incentives to U.S. residents to purchase a new, more fuel efficient vehicle when trading in a less fuel efficient vehicle, boosted very high demand for vehicles. The initial $1 billion appropriated for the system was reportedly exhausted by July 30, 2009, well before the anticipated end date of November 1, 2009, and resulted to the approval of an additional $2 billion in early August 2009. Things took a positive turn when GM, AXL’s largest customer, saw its July 2009 sales rising to September 2008 levels, which was then followed by the automaker’s announcement in mid-August 2009 that it would build 60,000 more cars in 2009 as a market response to falling supplies.

Shares of AXL were boosted last month on the Company’s announcement that it would receive a $110 million cash payment from GM to cover contracts terminated through the automaker’s Chapter 11 bankruptcy in June 2009, as well as an extended loan facility for up to $100 million.

On September 11, Barclays analyst Brian Johnson upped AXL shares to “Overweight” from “Equal Weight,” According to the analyst’s report, the Company’s debt deal with its lenders and GM’s cash infusion have helped ease concerns over the Company’s liquidity. Johnson also wrote that AXL is poised to benefit from resurgence in demand for full-size pickups, for which it produces components. AXL’s price target was also raised to $13 from $8.

Last month, Dauch reported that the Company’s efforts to realign its global manufacturing capacity and reduce its operating break-even level were leading to permanent and transformational improvements in its cost structure and operating flexibility.

In its recent regulatory filing, AXL announced it has been granted a waiver extension on its revolving-credit facility for time, which expired Thursday, September 17. According to the Company, the previous waiver expired as ” it continues to work with key stakeholders on various commercial agreements and financing arrangements that would result in a comprehensive long-term solution outside of bankruptcy.” Through these waivers, AXL is given time to renegotiate its loans and avoid a bankruptcy filing.

A Wall Street Journal report has suggested that AXL is very close to finalizing negotiations with its lenders, given the latest extension to the waiver, which is unusually short.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

On September 16, 2009, AXL closed at $8.13, 2.98% below its 52-week high of $8.38, set on September 19, 2008.

Currently, the MACD for AXL indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

AXL is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

AXL is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

Comparative Analysis

Source: Yahoo! Finance, Analyst Estimates.

Insider Trading Activity
NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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