American Axle Receives a Hold from FBR Capital

By Ryan Adsit

FBR Capital analyst Christopher Van Horn reiterated a Hold rating on American Axle (NYSE: AXL) on November 4 and set a price target of $16. The company’s shares opened today at $13.98.

Van Horn wrote:

“Shares of American Axle closed down 18% on November 3 after the company announced that it had agreed to acquire Metaldyne Performance Group (MPG) for $1.6 billion, plus the assumption of $1.7 billion net debt. American Axle also announced largely in-line 3Q16 results, but the clear focus for investors was the acquisition. We have three thoughts for investors to consider: (1) Pro forma customer exposure looks likely to be much more diversified than it is for American Axle now; (2) P&L accretion seems possible given the synergistic combination of two driveline companies, but the equity value for AXL holders may be incrementally diluted according to our analysis; (3) American Axle would lever up dramatically through this acquisition, which we consider to be risky when production is slowing. All things considered, we remain neutral on AXL shares. The transaction has some interesting thematic elements related to lightweighting and fuel efficiency, but it does not look to be hugely beneficial to AXL shareholders, and we are a bit concerned about the higher leverage possibility.”

According to TipRanks.com, Horn is a 3-star analyst with an average return of 1.0% and a 43.9% success rate. Horn covers the Consumer Goods sector, focusing on stocks such as Standard Motor Products, Federal-Mogul Corp., and Tower International.

American Axle has an analyst consensus of Hold, with a price target consensus of $23.

The company has a one year high of $22.98 and a one year low of $11.44. Currently, American Axle has an average volume of 1.17M.

Based on the recent corporate insider activity of 49 insiders, corporate insider sentiment is neutral on the stock. Most recently, in August 2016, John Sofia, the VP Global Program Management of AXL sold 18,621 shares for a total of $326,972.

American Axle & Manufacturing Holdings, Inc. operates as a supplier to the automotive industry. It operates through its subsidiaries, which are engaged in the manufacturing, engineering, designing and validation of driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles, passenger cars, crossover and commercial vehicles. The company’s driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. American Axle & Manufacturing Holdings was founded by Richard E. Dauch on March 1, 1994 and is headquartered in Detroit, MI.