UBS Raises American Axle Price Target to $7.50, Keeps Buy Rating

UBS raised American Axle's (AXL) price target to $7.50 from $7 and maintained a Buy rating. The company reported solid Q2 results and increased its outlook despite a tariff headwind. The analyst expects AXL to continue benefiting from strong demand for automotive parts and its diversified customer base.

American Axle & Manufacturing (AAM) reported its second-quarter 2025 earnings on August 8, delivering stronger-than-expected earnings per share (EPS) results, though revenue fell short of forecasts. The company’s stock responded positively, climbing 12.77% in pre-market trading. Key Takeaways

EPS of $0.21 surpassed the forecast of $0.15, a 40% positive surprise. Revenue of $1.54 billion missed the forecast of $1.58 billion. Stock surged 12.77% in pre-market trading following the earnings release. Strategic focus on electrification and operational excellence highlighted in the call. Updated guidance for 2025 indicates stable growth expectations.

Company Performance

American Axle & Manufacturing (AAM) demonstrated resilience in Q2 2025, with a notable improvement in earnings per share compared to the same period last year. The company continues to focus on strategic initiatives, including electrification and operational excellence, to drive future growth. Despite a slight dip in year-over-year sales, AAM’s adjusted EBITDA margin improved, reflecting effective cost management and productivity enhancements.

Financial Highlights

Revenue: $1.54 billion, down from $1.63 billion in Q2 2024. Earnings per share: $0.21, up from $0.19 in Q2 2024. Operating cash flow: $91.9 million. Adjusted free cash flow: $48.7 million. Adjusted EBITDA: $202.2 million, with a margin of 13.2%.

Earnings vs. Forecast

American Axle reported a significant EPS beat, with actual earnings of $0.21 compared to the forecasted $0.15, marking a 40% surprise. However, revenue fell short of expectations, coming in at $1.54 billion against a forecast of $1.58 billion, a negative surprise of 2.53%. The EPS beat reflects improved operational efficiencies and cost controls, while the revenue miss highlights ongoing market challenges.

Market Reaction

Following the earnings announcement, American Axle’s stock surged 12.77% in pre-market trading, indicating strong investor confidence in the company’s performance and outlook. The stock price movement places it closer to its 52-week high of $7.25, suggesting a positive market sentiment despite the revenue shortfall.

Outlook & Guidance

Looking ahead, American Axle updated its 2025 guidance, projecting sales between $5.75 billion and $5.95 billion and adjusted EBITDA in the range of $695 million to $745 million. The company remains focused on improving its business units, reducing fixed costs, and controlling spending. The anticipated start of production with Scout Motors in 2027 and the pending Dallet acquisition are expected to bolster future growth and geographic diversification.

Executive Commentary

CEO David Dauk emphasized the company’s readiness for electrification, stating, "We are prepared for electrification, but a longer ICE tail is good for AAM." CFO Chris May highlighted financial strategy post-acquisition, noting, "Our goal is to deleverage quickly after the Dallet combination."

Risks and Challenges

Supply chain disruptions could impact production timelines. Market saturation in key regions may limit growth potential. Macroeconomic pressures, including potential tariff impacts, could affect profitability. Currency fluctuations pose a risk to international operations. The integration of Dallet may present operational challenges.

Analyst Reaction

UBS raised American Axle's (AXL) price target to $7.50 from $7 and maintained a Buy rating. The company reported solid Q2 results and increased its outlook despite a tariff headwind. The analyst expects AXL to continue benefiting from strong demand for automotive parts and its diversified customer base.

References:

[1] https://www.investing.com/news/transcripts/earnings-call-transcript-american-axle-q2-2025-beats-eps-forecast-stock-surges-93CH-4181205