American Axle & Manufacturing (AXL) – Bullish
|American Axle & Manufacturing Holdings, Inc. (NYSE: AXL) provides drive train systems and components to the U.S. automotive industry. The company reports earnings on Friday before the open. Analysts are looking for 38 cents per share compared to a loss of 18 cents a year ago. Starting in April 2008, AXL went on a string of seven straight losing quarters. To make matters worse, it missed the consensus earnings estimate five times, usually by a wide margin. But the past four quarters have resulted in three beats and a tie, and the stock has responded well after three of those four reports.Technically, the shares have been in a tight trading range for the past two months. For the past couple of weeks, the 100-day moving average has provided firm support and should give the stock a solid launching pad after earnings. But the main reason we like AXL is lingering pessimism among the shorts and analysts. Short interest is coming off a peak last seen in November, just before the stock went on a six-week 80% rally. And just one-third of covering analysts rate the stock a “buy,” leaving plenty of room for upgrades.
With car sales pointed higher, AXL should manage another beat. If so, look for the combination of technical support and unwinding pessimism to break the stock above its current range, rewarding AXL call buyers.
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