American Axle (AXL) Down 42.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for American Axle & Manufacturing (AXL). Shares have lost about 42.5% 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's Q2 Earnings Miss Estimates, Down Y/Y

American Axle posted adjusted earnings of 55 cents per share in the second quarter of 2019, missing the Zacks Consensus Estimate of 59 cents. In second-quarter 2018, adjusted earnings were $1.23.

In the quarter under review, the company reported net income of $52.7 million compared with $151.3 million a year ago.

Sales declined to $1.70 billion from the year-ago figure of $1.91 billion. The top line missed the Zacks Consensus Estimate of $1.8 billion.

American Axle’s SG&A (selling, general & administrative) expenses were $91.3 million for second-quarter 2019 in comparison with $95 million in the prior-year quarter.

Gross profit moved down to $248.3 million in second-quarter 2019 from $331.4 million a year ago. Operating income declined to $119.9 million from $190.3 million.

Financial Position

American Axle had cash and cash equivalents of $248.8 million as of Jun 30, 2019, down from $476 million as of Dec 31, 2018. Net long-term debt was $3.7 billion as of Jun 30, 2019, similar to the figure recorded on Dec 31, 2018.

For the three months ending Jun 30, 2019, the company’s adjusted free cash outflow was $119.3 million compared with $100.3 million for the same period of last year.

Outlook

For 2019, the company expects sales of $6.9-$7 billion, down from the previously mentioned $7.3-$7.4 billion. Also, its adjusted EBIDTA is now projected to be $1.05-$1.10 billion, down from the previous guidance of $1.2-$1.25 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -29.08% due to these changes.

VGM Scores

Currently, American Axle has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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. It's no surprise American Axle has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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