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Bank of America downgraded American Axle & Manufacturing Holdings (NYSE:AXL) to an Underperform rating from Neutral due to lack of any positive catalysts for the stock until well into 2024. The firm also warned that there is risk of volume pressure in the near term, as well as persistent plant-level issues that could also impact performance negatively.
Analyst John Murphy said there are potential impacts from labor cost inflation in the mid-to long-term after the signing of the new United Auto Workers contracts with the Detroit Three automakers. In addition, Murphy noted positive mix that benefited American Axle (AXL) over the last two years is unlikely to continue and may be a relative headwind versus other suppliers in 2024.
“In addition to short term considerations, AXL’s recovery may be slower than other suppliers due to relatively less favorable market conditions. While we estimate a continued recovery in NA production volumes in 2024, we expect mix to degrade partially.”
BofA assigned a price objective of $8 to American Axle (AXL), based on an EV/EBITDA multiple of roughly 4X the firm’s 2024 estimates, which was noted to be somewhat lower than the historical average of roughly 4.5X, but in range of recent trading ranges and reflective of the forthcoming production volume recovery.
Shares of American Axle & Manufacturing (AXL) fell 5.29% in premarket trading to $6.81 vs. the 52-week range of $6.29 to $10.77.