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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.

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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.