ArvinMeritor shares rise after Goldman upgrades

Shares of ArvinMeritor Inc. jumped on Thursday after a Goldman Sachs analyst upgraded the auto parts supplier and raised his rating on the automotive sector.

Shares of the Troy Mich.-based company rose 29 cents, or 8.3 percent, to $3.78 in midday trading.

Auto analyst Patrick Archambault upgraded ArvinMeritor, which manufactures an array of commercial vehicle systems, to "Buy" from "Neutral" and lifted his price target to $5 from $3 in a note to investors.

The new price target implies an upside of 43 percent from its Wednesday close of $3.49.

Archambault said ArvinMeritor is poised to benefit from a recovery in production of certain trucks and from an improved cost structure, which will outweigh weaker European production.

The analyst also raised his coverage view of the auto sector to "Attractive," from "Neutral," saying a "rising tide" of auto sales, backed by falling interest rates at financing companies and a vehicle scrappage bill, is likely to drive shares higher.

"We think we are still in the middle phase of a cyclical rally and would use any weakness to build positions," he wrote.

He also downgraded shares of the parts supplier BorgWarner Inc. to "Neutral" from "Buy," saying shares have approached a fair price. BorgWarner shares fell 50 cents to $31.33.

Auto parts suppliers have been hit hard by the auto downturn, as automakers reduce production to cope with falling sales. General Motors Corp. has shut down numerous factories in the U.S. until mid July, while Chrysler Group LLC ceased all production while under Chapter 11 bankruptcy protection.