American Axle Jumps 9% on Upgrade to Aggressive Buy

Shares of American Axle & Manufacturing are up 9.4% to $25.95 Monday after analysts from Keybanc Capital Markets upgraded the company's shares from Buy to Aggressive Buy and raised 12-month estimates for the company from $30 to $34. In a research note Monday, the analysts note AXL may announce an additional Special Attrition Program [SAP] in early-2008 which could reduce its per-hour cost and excess manpower. The company is also well-positioned for new contract wins of $100 million from Dana, they said. "Belief that there are significant earnings drivers on the horizon that will force material upward revisions to 2008 and 2009 [EPS] estimates. We believe the financial community in general continues to underestimate the company's true earnings power, and contend that it will be revealed over the course of the next year in the form of the following higher-probability events: 1) Another company-wide special attrition program in early 2008 that may substantially reduce both excess manpower and its per-hour cost; 2) $100 million in axle-related component business from Chrysler beginning in 2H09; and 3) Roughly $100 million in new business wins from Dana with 50% beginning in 2008 and the remaining portion in 2009." The firm also raised 2009 EPS estimates from $3.10 to $3.53.

Sources: Newratings.com, StreetInsider.com
Commentary: Underdog Catcher George Putnam's Long and Short Picks - Barron's
Stocks to watch: AXL. Competitors: ARM, DCNAQ.PK, MGA, BWA, JCI

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