UPDATE 3-American Axle forecast seen light, shares fall

Fri Oct 29, 2010 1:27pm EDT

* Q4 revenue outlook disappoints, shares down 3.5 pct

* Q3 sales $618.2 mln, beats Street view $570.1 mln

* Q3 EPS 52 cents, Street view 39 cents

* 'Outperformance has become the norm' - analyst (Adds analyst comment, executive comment from interview, bylines)

By Bernie Woodall and Deepa Seetharaman

DETROIT, Oct 29 (Reuters) - American Axle & Manufacturing Holdings Inc's (AXL.N) third-quarter results trounced Wall Street estimates on Friday, yet shares slumped due in part because its fourth-quarter revenue forecast that was weaker than expected.

Shares fell as much as 5.7 percent even as the company lifted its full-year sales outlook to between $2.2 billion and $2.3 billion..

But J.P. Morgan analyst Himanshu Patel said the company's 2010 sales outlook suggested fourth quarter revenue would be $507 million to $583 million. The midpoint of this range fell short of his estimate.

The average Wall Street estimate for American Axle's fourth-quarter revenue is $559 million, according to Thomson Reuters I/B/E/S.

Chief Financial Officer Michael Simonte said the drop in American Axle's stock price may have to do with heightened expectations after a strong showing by auto suppliers in the third quarter.

"In general, everybody has outperformed expectations and had a little bit of 'buy on the rumor and sell on the news' reaction," Simonte said in an interview with Reuters.

Simonte said in an interview with Reuters that the company's fourth-quarter revenue outlook was between $550 million and $575 million.

Gabelli & Co analyst Brian Sponheimer pointed to the run-up in the stock prices of suppliers over the past seven weeks. American Axle's shares were trading near $8.50 seven weeks ago and rose to over $10 before dropping Friday.

"With suppliers generally outforming consensus expectations, outperformance becomes the norm," Sponheimer said. "It becomes very difficult for companies to over-deliver, partly because shares have appreciated materially over the last seven weeks in most cases."

American Axle's shares were down 46 cents, or 4.7 percent, at $9.37, after touching an intraday low of $9.27 on the New York Stock Exchange.

EARNINGS BEAT

Detroit-based American Axle reported a net profit of $38.8 million, or 52 cents per share, versus a year-earlier profit of $19.6 million, or 35 cents a share. Analysts expected earnings of 39 cents per share.

The earnings beat was fueled by higher-than-expected sales and a lower-than-expected tax rate in the third quarter, analysts said. Revenue was $618.2 million, besting the average analyst estimate of $570.1 million.

Third-quarter results are compared to a year-earlier quarter in which production was greatly slowed by two of the company's major customers, General Motors Co (GM.N)[GM.UL] and Chrysler. Both of those U.S. automakers in the summer of 2009 shut plants as those companies were emerging from government-sponsored bankruptcies and restructuring.

American Axle builds axles and other driveline components mainly for larger vehicles, but aims to diversify its business to include smaller vehicles and revenue from companies other than GM. Non-GM sales nearly doubled from last year's third quarter to $147.1 million.

Third-quarter results from auto suppliers this week showed huge gains in revenue and profit.

Net income gains include American Axle, up 98 percent; BorgWarner (BWA.N), up 520 percent; Lear Corp (LEA.N), up 287 percent; Johnson Controls Inc (JCI.N), up 33 percent; and Federal-Mogul Corp (FDML.O), up 430 percent.

Each of the companies has cut costs since the doldrums of 2009, when U.S. auto sales were the lowest in 27 years. Supplier gains have outstripped the growth in auto sales, which several automakers and analysts including J.D. Power and Associates expect to end this year near 11.5 million vehicles, compared to 10.4 million vehicles in 2009. (Reporting by Deepa Seetharaman and Bernie Woodall, editing by Gerald E. McCormick, Dave Zimmerman, Derek Caney)

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