What happened?

Shares of American Axle & Manufacturing Holdings Inc. (AXL -0.89%), a manufacturer of driveline systems for light trucks, crossovers, cars, and SUVs, are spiraling 26% lower as of 11:20 a.m. EDT Friday after releasing a disappointing third-quarter result.

So what

American Axle's third-quarter revenue rose to $1.82 billion, which actually topped analysts' estimates calling for $1.78 billion, but the bottom line was what drove today's sell-off. Adjusted earnings per share checked in at $0.63, which was well short of analysts' estimates of $0.90 per share. Worse yet, management cut its outlook for free cash flow from 5% of sales to roughly 4%.

View from under a vehicle chassis.

Image source: Getty Images.

"AAM's third quarter of 2018 results reflect an increase in launch-related expenses and certain manufacturing costs. As a result, our third quarter financial performance did not meet our expectations," said AAM's chairman and chief executive officer, David C. Dauch, in a press release. "Our results this quarter do not change our confidence in meeting AAM's long-term objectives."

Now what

After a disappointing third quarter, management is focusing on several key program launches that will help generate improved free cash flow during 2019 and improve its overall financial performance. AAM's target is for full-year 2019 adjusted EBITDA margin to be roughly 17% of sales and for sales to check in flat or 2% higher than 2019. As U.S. seasonally adjusted annual rate of sales, or SAAR, plateaus, it's difficult for investors to buy into a supplier growth story, which is clearly weighing on the stock after its disappointing third-quarter result and lowered guidance.