American Axle profit beats Street

Stock Market Predictions

(Global Markets) - U.S. auto parts maker American Axle and Manufacturing Holdings Inc (AXL.N) posted a fourth-quarter profit that beat market expectations on the back of higher margins.

The company, which makes axles and other driveline components for trucks and larger vehicles, also reaffirmed its forecasts for 2012 sales and margins. Shares were up 2.4 percent in afternoon trading.

"We're seeing signs of strengths in the economy," Chief Financial Officer Michael Simonte said in a telephone interview.

"The automotive industry will continue to outgrow the overall economy in our judgment," he added. "There's a substantial amount of replacement demand for vehicles that are aging well beyond historical levels."

Simonte said the company now sees the high end of its expected range of 13 million to 13.5 million for U.S. 2012 light vehicle sales as the most probable outcome.

American Axle said it was quoting over $1 billion of potential new incremental business from 2013 to 2016, and 90 percent of this expected business would come from non-General Motors Co (GM.N) business.

American Axle has been pushing to diversify its business away from GM, which accounts for more than 70 percent of its sales. For the quarter, non-GM business grew 11 percent to $175 million.

American Axle had previously said its goal is to reduce dependence on GM to 50 percent by 2015.

Analyst Matthew Stover of Guggenheim Securities said the near-term story for American Axle is that the company does not have the European risk that other companies have but has leverage to the new GM truck program in 2013.

American Axle posted gross margins for the fourth quarter of 17.5 percent.

"The quarter's strong margin performance highlights the company's capability to continue growing profitability, in our view," Citigroup analyst Itay Michaeli said in a note.

For the quarter, the company reported adjusted earnings of 47 cents a share, compared with analysts' estimate of 39 cents a share, according to Thomson Global Markets I/B/E/S. Most of the outperformance was due to a low tax rate, analysts said.

Net sales rose 4 percent to $605.6 million.

It reaffirmed it expects 2012 sales in the range of $2.8 billion to $2.9 billion and earnings before interest, taxes, depreciation and amortization in the range of 14 percent to 14.5 percent of sales.

Shares of the Detroit-based company were up 29 cents at $12.62 in afternoon trading on the New York Stock Exchange. The stock has almost doubled since touching a year low in October.

(Additional reporting by Ben Klayman in Detroit; Editing by Hezron Selvi, Maju Samuel and Steve Orlofsky)