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Why Is American Axle (AXL) Down 4.2% Since Last Earnings Report?

A month has gone by since the last earnings report for American Axle & Manufacturing (AXL). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American Axle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

American Axle Q4 Earnings Beat Estimates, Down Y/Y

American Axle posted adjusted earnings of 45 cents per share in the fourth quarter, beating the Zacks Consensus Estimate of 43 cents. In fourth-quarter 2017, adjusted earnings were 89 cents.

During the quarter under review, the company reported net loss of $361.8 million or loss of $3.24 per share against net income of $106.3 million or 93 cents per share in the year-ago quarter.

Revenues decreased to $1.69 billion from the year-ago figure of $1.73 billion. The top line slightly surpassed the Zacks Consensus Estimate of $1.68 billion.

American Axle’s SG&A (Selling, General & Administrative) expenses were $97.1 million for fourth-quarter 2018 in comparison with $101 million in the prior-year quarter.

Gross profit decreased to $225.3 million in fourth-quarter 2018 from $294.3 million in the year-ago quarter. Operating loss during the reported quarter was $394.3 million against operating income of $148.6 million in fourth-quarter 2017.

2018 Results

For 2018, American Axle reported earnings of $3.28 per share, down from the 2017 figure of $3.75.

Net sales in 2018 were $7.27 billion, up from $6.27 billion in 2017.

Financial Position

American Axle had cash and cash equivalents of $476.4 million as of Dec 31, 2018, up from $376.8 million as of Dec 31, 2017. Net long-term debt was $3.7 billion as of Dec 31, 2018, compared with $4 billion as of Dec 31, 2017.

Cash flow from operations for the three months ending Dec 31, 2018, was $258.3 million in comparison with $226.3 million recorded in the prior-year period. For the three months ending, Dec 31, 2018, American Axle’s adjusted free cash inflow was $142.4 million compared with an inflow of $50.9 million for the three months ending, Dec 31, 2017.

Outlook

For 2019, the company expects sales of $7.3-$7.4 billion.

American Axle anticipates adjusted earnings before income taxes, depreciation and amortization (EBITDA) of $1.20-$1.25 billion. The company set adjusted free cash flow target of $350-$400 million for 2019.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -53.51% due to these changes.

VGM Scores

Currently, American Axle has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Axle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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