American Axle (AXL) Q1 Earnings Top, Revenues Miss Estimates

American Axle & Manufacturing Holdings Inc. (NYSE:AXL) posted adjusted earnings of $1.03 per share for the first quarter, outperforming the Zacks Consensus Estimate of 91 cents. Earnings increased from 78 cents recorded in the first quarter of 2016.

The company reported net income of $78.4 million or 99 cents per share in the first quarter of 2017 compared with $61.1 million or 78 cents in the year-ago quarter.

Revenues increased to $1.05 billion in the reported quarter from the year-ago figure of $0.97 billion. However, the top line fell short of the Zacks Consensus Estimate of $1.06 billion.

American Axle’s content-per-vehicle – dollar value of product sales supporting customers’ North American light truck and sport utility vehicle (SUV) programs – came in at $1,630 from $1,611 in first-quarter 2016. For the reported period, company’s SG&A and R&D spending were $82.8 million and $41 million, respectively.

Gross profit increased to $210.7 million (20.1% of sales) in first-quarter 2017 from $174 million (18% of sales) in the prior-year quarter. Operating income increased to $111.9 million from $98.4 million a year ago.

Financial Position

American Axle had cash and cash equivalents of $1.5 billion as of Mar 31, 2017, up from $481.2 million as of Dec 31, 2016. Long-term debt was $2.58 billion as of Mar 31, 2017 compared with $1.4 billion at the end of 2016.

Cash flow from operations in first-quarter 2017 was $62.3 million. For the same quarter, net capital spending of the company was $34.1 million. American Axle’s free cash flow for the first quarter was $28.2 million, whereas adjusted free cash flow for the same period was $60.5 million excluding the impact of cash payments for restructuring and acquisition-related costs and settlements of pre-existing accounts payable balances with acquired entities.

2017 Outlook

For fiscal 2017, sales are expected to be approximately $6.1 billion, higher than $3.95 billion recorded in 2016. The sales expectation is based on the launch of programs in the company’s new and incremental business backlog. The company also assumes that the U.S. industry sales on a seasonally adjusted annualized rate (SAAR) basis will be around 17.5 million light vehicle units in 2017.

Earnings before income taxes, depreciation and amortization (EBITDA) margin will likely be in the range of 17–18% in 2017. American Axle expects adjusted free cash to be approximately 5% of sales in 2017. In addition, capital spending will be around 8% of sales this year.

Price Performance

Over the last six months, American Axle’s share price has increased 30.25% while the Zacks categorized Auto/Truck-Original Equipment industry has seen a 22.33% increase.

Zacks Rank & Key Picks

American Axle currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Allison Transmission Holdings Inc. (NYSE:ALSN) , Dana Incorporated (NYSE:DAN) and Adient PLC (NYSE:ADNT) .

Both Allison and Dana Inc. sport a Zacks Rank #1 (Strong Buy). Each of them has an expected long-term earnings growth rate of 11% and 3%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adient carries a Zacks Rank #2 (Buy). The company has an expected long-term earnings growth rate of 10.64%.

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