American Axle's stock jumps after better-than-expected earnings

By Ciara Linnane

Maker of automotive driveline systems and components offered full-year sales guidance that topped consensus

American Axle & Manufacturing Holdings Inc.'s stock soared more than 6% Friday, after the maker of automotive driveline systems and components swept past estimates for the second quarter.

Detroit-based American Axle (AXL) had net income of $18.2 million, or 15 cents a share, for the quarter - up from $8.0 million, or 7 cents a share, in the year-earlier period.

Adjusted per-share earnings came to 19 cents, well ahead of the 11-cent FactSet analyst consensus.

Sales rose to $1.63 billion from $1.57 billion a year ago, also ahead of the $1.59 billion FactSet consensus.

Chief Executive David C. Dauch said earnings were boosted by positive contributions from volume and mix.

"Looking ahead, AAM will maintain and develop a comprehensive product portfolio to support current and future powertrain solutions while focusing on quality, technology leadership and operational excellence," he said in prepared remarks.

On a call with analysts, Dauch said the company saw production stability at the start of the quarter, followed by periods of higher-than-expected downtime near the end.

"We will closely monitor this trend in the second half," he said, according to a FactSet transcript.

The company has won two supply contracts in Europe, he noted - one with a global original equipment manufacturer, or OEM, and one with a luxury European OEM.

The former is for American Axle's modular vehicle platform that can support a multitude of propulsion systems, including internal combustion, hybrid and electric vehicle derivatives. The latter is for helical drive gears for electric drives for a future EV program.

The company will also launch driveline systems for the next generation General Motors, Delta Crossover Vehicle Program (GM), and the next generation RAM, medium and heavy-duty trucks, said Chief Financial Officer Chris May on the call.

Overall, the company is expecting the U.S. to lag Europe and Asia, especially China, on electrification, after the major OEMs launched ambitious plans they later had to scale back in the face of far weaker demand from consumers than expected.

While China and Europe are going all in on full battery EVs and hybrids, in the U.S., "it's all about affordability right now. It's about range, anxiety and it's about charging infrastructure. And until those issues get fixed, I think you're going to see lag in the U.S. for a period of time, which is going to impact all of us, which just means we're going to be making more ICE and hybrid for longer periods of time," said Dauch.

Other highlights from the quarter include that the company generated net cash from operating activities of $142.8 million, up from $132.8 million a year ago. Adjusted free cash flow came to $97.9 million, up from $95.8 million a year ago.

The company tweaked its full-year guidance and now expects sales of $6.1 billion to $6.3 billion, versus prior guidance of $6.05 billion to $6.35 billion. The FactSet consensus is for $6.05 billion.

The company said its guidance is based on the assumption that North American light vehicle production total about 15.8 million units.

The stock has fallen 25% in the year to date, while the S&P 500 has gained 11.9%.

-Ciara Linnane

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08-09-24 1345ET

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