Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

Why Shares of American Axle and Manufacturing Are Surging Today

What happened 

Shares of American Axle and Manufacturing Holdings (NYSE: AXL) were up sharply on Friday. As of 12:00 p.m. EDT, American Axle's shares were trading at $19.25, up about 7% from Thursday's close.

Why the jump? Before the market opened on Friday, the company reported third-quarter earnings that were well above Wall Street's expectations and boosted its full-year guidance.

American Axle's third-quarter earnings came in well ahead of Wall Street expectations. Image source: American Axle and Manufacturing Holdings.

So what

American Axle supplies parts and components to automakers mostly related to (no surprise) vehicle axles. The company has long had a strong relationship with General Motors, but CEO David Dauch has been moving to diversify its business and client base, largely through acquisitions.

That's working. Fifty-nine percent of its total revenue in the third quarter came from customers other than GM. That's a record, and the efforts that made it happen also drove financial results that were significantly improved from its year-ago result:

  • Revenue rose 70% to $1.72 billion.
  • Net income rose 40% to $86.2 million, or $0.75 per share. (Wall Street analysts polled by Thomson Reuters had expected net income of $0.65 per share, on average.) 
  • Free cash flow rose 61% to $87.9 million.

That's one reason why the stock surged on Friday. The other: improved guidance. 

Now what

American Axle also boosted its full-year guidance. It now expects:

  • Revenue between $6.2 billion and $6.25 billion (prior guidance: about $6.1 billion).
  • Adjusted EBITDA of about $1.1 billion (at the high end of the range given in prior guidance). 
  • Adjusted free cash flow of about 5% of revenue (unchanged from prior guidance). 

Long story short: Things are looking up for American Axle.

10 stocks we like better than American Axle & Manufacturing
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and American Axle & Manufacturing wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.