American Axle Outperforms On Costs, But Long-Term Revenue Leverage Is Still Debatable

It’s likely true that internal combustion engines will be with us for a quite a while, and particularly with respect to pick-ups, but I still believe exposure to electrification is important and American Axle & Manufacturing’s (AXL) (“American Axle”) relatively weak positioning here, not to mention its high leverage and dependence on the U.S. market, have been negatives in my view of the stock’s potential.

The shares are down about 20% since my last update, underperforming names I’ve preferred like BorgWarner (BWA), Dana (DAN), and Valeo (OTCPK:VLEEY). While I do believe the liquidity concerns that hammered the shares down into the $2s are largely over and done with, the company’s leverage to light trucks remains a mixed blessing in my book, and I remain concerned that the company doesn’t really have the wherewithal to be a big player in areas of the market that offer more growth. That said, while I don’t really like the company’s strategic positioning, the shares could still have upside into the low teens if U.S. SAAR numbers continue to beat expectations as the auto recovery unfolds.

 

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American Axle Outperforms On Costs, But Long-Term Revenue Leverage Is Still Debatable