Skip to main content

American Axle Manufacturing Stock is an Automotive Recovery and Electrification Play

Friday, February 12, 2021 | Jea Yu
American Axle Manufacturing Stock is an Automotive Recovery and Electrification PlayTier 1 automotive parts supplier American Axle and Manufacturing Holdings (NYSE: AXL) stock is slowly recovering back towards pre-COVID 19 levels. Shares underperformed the benchmark S&P 500 index (NYSEARCA: SPY)mostly from resonating effects of the pandemic. As COVID-19 caseloads start to retract as vaccine rollout accelerates, the auto industry is staging a sharp rebound. The maker of drivetrain products are a direct beneficiary of the economic recovery and the electrification of vehicles. The electronic vehicle (EV) revolution will bolster revenue streams for the Company as its major clients including General Motors (NYSE: GM) and Ford Motor (NYSE: F) bolster their investment in EVs. American Axle’s Electric Drive Technology now powers Jaguar’s first pure electric mode, supplying both front and rear e-Drive units. While shares are still trading below its 2020 pre-COVID levels, the recent surge can still provide opportunistic pullback levels for prudent investors to consider scaling into a position.

Q3 FY 2020 Earnings Release

On Oct.30, 2020, American Axle released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported adjusted earnings-per-share (EPS) of $1.15 excluding non-recurring items versus (-$1.10) EPS in Q3 2019. Revenues fell (-16.7%) year-over-year (YoY) to $1.41 billion. Adjusted EBITDA was $297.1 million, or 21% of sales. Net cash from operations was $249.5 million and adjusted free cash flow was $217.2 million. The Company provided full-year 2020 forecasts of revenues around $4.6 million, adjusted EBITDA ranging between $665 million to $680 million with adjusted free cash flow ranging between $220 million to $235 million.

Conference Call Takeaways

American Axle CEO, David Dauch, reiterated that negative impact of COVID-19 for the quarter was approximately $87 million. Additionally, sales for Q3 2019 included $155 million from the U.S. iron casting operations, which were sold in December 2019. This distinction should be noted in the YoY topline comparisons. Adjusted EBITDA was hit by $16 million from the effects of COVID-19 for the quarter. The Company ended the quarter with nearly $1.5 billion in liquidity. CEO Dauch summed it up, “And with two more electric drive system launches and multiple electric powertrain component launches next year as well as many significant new business opportunities ahead, AAM is laser focused on paving the path towards profitable growth and an even brighter future… stay tuned for more developments in this electrifying area.”

Electric Vehicle Driveline Systems

American Axle is the global leader in driveline systems for full-size pickup trucks and SUVs and the largest automotive metal forger in the world. While combustion engine vehicles are still here to stay, the Company is actively transitioning to electric drive line solutions with several projects incorporating their Electric Drive programs in Europe and China. Electrification growth drivers include participation in commercial EV truck markets, electric powertrain components and developing advanced next-gen products. CEO Dauch addressed in the conference call, “The only thing we can say now is we’ve got two vehicle programs in production today, we’ve got two additional electrification programs I’ll be launching next year, as well as some component support for electrification, our market baskets about $1.05 billion of new opportunities, of which nearly half of that is tied to electrification.” He stated, “Clearly, there’s a sift from traditional product to more the electrification product. And we’re trying to position ourselves in the marketplace to win our fair share of the business.” Markets are starting to price in a premium for legacy automotive parts suppliers transitioning for the EV markets. Prudent investors can monitor AXL for opportunistic pullback levels to gain exposure.

American Axle Manufacturing Stock is an Automotive Recovery and Electrification Play

 AXL Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames provide a broader view of the price action playing field for AXL stock. The monthly rifle chart triggered a monthly mini pup spike with a rising 5-period moving average (MA) at $8.43 grinding towards the monthly upper BBs near the $12.90 Fibonacci (fib) level. The monthly breakout formed on market structure low (MSL) buy trigger above $8.03. The weekly rifle chart formed a full oscillation up through the 80-band and triggered a high band mini pup on the thrust back above through the weekly 5-period MA  at $9.37 as the upper BBs sit near the $11.11 fib. While a “late bloomer”, shares are elevated. Prudent investors can watch for a weekly 80-band stochastic crossover down to consider exposure at opportunistic pullback levels at the $9.12 fib, $8.43 monthly 5-period MA, $7.55 fib, $7.06 fib, and the $6.29 fib. The upside trajectories range from the $12.67 fib to the $23.91 fib.

Featured Article: What does a hold rating mean?


8 EV Stocks To Electrify Your Growth Portfolio

If you are looking for the next hot growth market, a market at the intersection of multiple secular trends, look no further than the EV market. Electric vehicles. It may not sound like much, but the days of EV as a fringe market are over.

Think about this. There is an average of 90 million vehicles sold annually. That’s units, not dollars, total sales of vehicles topped $3.1 trillion in 2019, and the number is expected to grow over the long-term.

The EV market is less than 3.% of global vehicle sales, but it’s growing. EV is expected to account for more than 50% of the total auto-fleet by 2050, and that target could be reached much sooner if battery technology advances.

When it comes to the EV market, it’s a “rising tide lifts all ships” kind of market, but there are still some clear winners to focus on.

View the "8 EV Stocks To Electrify Your Growth Portfolio".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
American Axle & Manufacturing (AXL)1.3$10.29+1.0%N/A-1.10Hold$10.38
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.