ArvinMeritor shares rise on growth expectations

Shares of auto supplier ArvinMeritor Inc. got a boost Friday from predictions of growth once the global automotive industry begins to rebound.

In heavy afternoon trading, ArvinMeritor shares rose 27 cents, or 7.2 percent, to $4.02 after peaking at $4.39 earlier in the day. Over the past 52 weeks, the company's shares have traded between 32 cents $18.11.

Brian Johnson of Barclays Capital raised his rating for the Troy, Mich.-based company to "Overweight" and doubled his price target to $6, citing expectations of normalized earnings in 2011.

"While we expect volumes to remain at very depressed levels for a few more quarters, recent comments from Volvo indicate that the industry may have reached a bottom in North America and in Europe," Johnson wrote in a note to investors.

"This should relieve some of the pressure on ArvinMeritor's near-term earnings and cash flows, and makes us more comfortable looking at rebound earnings power and valuation."

Johnson said the company also could get a boost from the possible sale of part of its light vehicle systems business.

ArvinMeritor, which currently makes parts for both commercial and light vehicles, said earlier this year that it had abandoned the prospect of selling the business in its entirety. Instead, the company said it would pursue a separate sale of the division's body systems business and consider a "timely and orderly exit" from its chassis systems business.

Johnson added that while ArvinMeritor could violate its debt agreements in the fourth quarter, he expects the company to get an amendment or waiver from its lenders.