Please ensure Javascript is enabled for purposes of website accessibility

Rough Q3 Results Send American Axle Shares Spiraling 26% Lower Today

By Daniel Miller – Nov 2, 2018 at 12:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

American Axle's third quarter hit a speed bump thanks to launch-related expenses and other manufacturing costs.

What happened?

Shares of American Axle & Manufacturing Holdings Inc. (AXL 0.88%), 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. 

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

American Axle & Manufacturing Stock Quote
American Axle & Manufacturing
AXL
$8.02 (0.88%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.