Another day, another quarter . specifically, another quarterly earnings release for American Axle (NYSE:AXL), which reports its Q1 2006 results tomorrow.
What analysts say:
- Buy, sell, or waffle? Fourteen analysts track American Axle, and their views are unchanged from last quarter: two buys, a sell, and 11 holds.
- Revenues. Those analysts expect American Axle to report 4.5% better quarterly sales, for $856 million.
- Earnings. But those higher sales are not expected to translate into higher earnings. Analysts expect a 27% decline in earnings per share, to $0.19.
What management says:
American Axle recently issued an update on its expectations for fiscal 2006. The company reiterated its earnings guidance of $1.20 to $1.30 per share in profits, based on the assumption that light-truck volumes at its North American automaking customers would decline by about 5% year over year. (And that raises the possibility that if Merrill Lynch was right to upgrade GM, as it did yesterday, things might go better for American Axle.)
CEO Richard Dauch went on to promise "significant cash flow gains this year," putting the estimated figure at $40 million in positive free cash flow. Be aware, though, that American Axle deducts dividends from its free cash flow calculations, so the standard definition of free cash flow equaling operating cash flow minus capital expenditures could well be closer to $75 million for the year.
What management does:
If Dauch's predictions prove anywhere near accurate, it would mark a real turnaround for American Axle, which has been struggling lately. Over the past 18 months, the firm has seen 500 basis points shaved off of its rolling gross margin, as raw-material and energy costs eroded gross profits. The firm's rolling operating and net margins look similarly awful and continue trending downward, leaving the company about one-third as profitable at last report as it was a year and a half ago.
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
14.5 |
13.8 |
11.8 |
10.5 |
9.8 |
9.5 |
|
Op. |
9.3 |
8.6 |
6.5 |
4.9 |
4.1 |
3.6 |
|
Net |
5 |
4.4 |
3.9 |
2.9 |
2.4 |
1.7 |
One Fool says:
Last quarter, I advised Foolish investors to look to American Axle's inventories and accounts receivable for early signs of a recovery. So far, those signs remain absent. Over the past six months, sales declined 1% year over year, while accounts receivable grew 2% and inventories climbed 13%. If better days are truly ahead -- especially for free cash flow generation -- then these numbers have to stop moving in opposite directions.
Competitors:
- Visteon (NYSE:VC)
- TRW (NYSE:TRW)
- Magna (NYSE:MGA)
- Lear (NYSE:LEA)
- Johnson Controls (NYSE:JCI)
- Siemens (NYSE:SI)
Fool contributorRich Smithdoes not own shares of any company named above.
