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American Axle (AXL) Q4 Earnings Surpass Estimates, Up Y/Y

American Axle & Manufacturing Holdings, Inc. AXL posted adjusted earnings of 89 cents per share for the fourth quarter, beating the Zacks Consensus Estimate of 77 cents. The reported figure excludes the impact of restructuring and acquisition-related costs, debt-refinancing and redemption costs plus non-recurring items including the tax effect. In fourth-quarter 2016, adjusted earnings were 78 cents.

The company reported net income of $106.3 million or 93 cents per share in the fourth-quarter 2017 compared with $46.9 million or 59 cents in the year-ago quarter.

Revenues increased to $1.73 billion in the reported quarter from the year-ago figure of $946.5 million. The top line also surpassed the Zacks Consensus Estimate of $1.69 billion.

American Axle & Manufacturing Holdings, Inc. Price, Consensus and EPS Surprise

American Axle’s SG&A (Selling, General & Administrative) expenses were $101 million for the reported period in comparison to $83 million in the prior-year quarter.

Gross profit increased to $294.3 million in fourth-quarter 2017 from $176.1 million in the prior-year quarter. Operating income increased to $148.6 million from $69.5 million a year ago.

Full-Year 2017 Results

American Axle reported adjusted earnings of $3.75 per share in 2017, up from $3.3 per share earned in  2016.

Net income was $337 million from $240.7 million, recorded in 2016. Revenues increased to $6.27 billion from $3.95 billion in 2016.

Financial Position

American Axle had cash and cash equivalents of $376.8 million as of Dec 31, 2017, up from $481.2 million as of Dec 31, 2016. Long-term debt was $4 billion as of Dec 31, 2017 compared with $1.4 billion on Dec 31, 2016.

Cash flow from operations in fourth-quarter 2017 was $226 million in comparison to the prior year's figure of $117 million. At the quarter-end, American Axle’s adjusted free cash flow was $50.9 million, compared with $62.8 million for the same period last year. The figure excludes the impact of cash payments for restructuring and acquisition-related costs, settlements of pre-existing accounts payable balances with acquired entities and interest payments upon the settlement of acquired company debt.

2018 Outlook

For 2018, the company’s sales expectation is roughly $7 billion, mostly depending on its anticipated program launches and assumption that the U.S. industry sales on a seasonally adjusted annualized rate (SAAR) will be within the range of 16.8-17 million light-vehicle units in 2018.

Further, adjusted earnings before income taxes, depreciation and amortization (EBITDA) margin is expected to be in the range 17.5-18% of sales in 2018. Also, American Axle’s guidance for adjusted free cash is assumed to be 5% of sales in 2018.

Zacks Rank & Key Picks

American Axle has a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are AB Volvo VLVLY, Lear Corporation LEA and Daimler AG DDAIF, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Volvo has an expected long-term growth rate of 15%. The company’s stock has seen the Zacks Consensus Estimate for quarterly earnings being revised 6.5% upward over the last 30 days.

Lear Corp. has an expected long-term growth rate of 7.1%. In the last six months, shares of the company have jumped 33.1%.

Daimler has an expected long-term growth rate of 5%. In the last six months, shares of the company have gained 27.2%.

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