Detroit Analyst upgrades American Axle

DETROIT (AP) -- An analyst lifted American Axle & Manufacturing Holdings Inc.'s rating to "Buy" from "Hold" on Wednesday and gave the stock a $15 price target for the next year, citing potential growth in truck axle sales.

KeyBanc Capital Markets analyst Brett Hoselton wrote in a note to investors that an expected drop in General Motors pickup truck and SUV production in the second half of the year already has been priced into American Axle's stock. The Detroit-based auto parts company gets 55 percent to 60 percent of its sales from the larger GM vehicles, Hoselton wrote.

There's potential for growth, however, if there's moderate improvement in the housing market or if oil stays below $100 per barrel, Hoselton wrote.

Hoselton expects American Axle should see revenue growth and diversification, which is supported by its new business backlog, with new product launches accelerating next year.

At the current sales rate, GM's stockpile of trucks would last 122 days, about double what is considered ideal. The company has said it is building up inventory to handle an economic recovery and some factory down time next year as it prepares for a new version of its pickups, the Chevrolet Silverado and GMC Sierra.

Hoselton wrote that extended summer shutdowns at GM's pickup factories, coupled with a recovery from the current soft patch and some added incentives, should bring the inventory under control heading into 2012.

Hoselton kept his 2011 earnings estimate at $1.67 per share for this year, but raised the 2012 estimate from $1.95 to $2.10.

Published: Thu, Jul 7, 2011