Street Calls of the Week
Investing.com - RBC Capital upgraded American Axle (NYSE:AXL) from Sector Perform to Outperform on Monday, while raising its price target to $8.00 from $6.00. The upgrade aligns with broader analyst optimism, as InvestingPro data shows five analysts have recently revised their earnings estimates upward for the upcoming period.
The upgrade follows RBC Capital’s updated valuation analysis of American Axle’s pending transaction with Dowlais. The firm applied a 4.0x multiple to its pro forma 2025 estimated EBITDA plus $300 million in synergies to arrive at a $6.9 billion enterprise value. Currently trading at an EV/EBITDA of 4.09x with trailing twelve-month EBITDA of $697.7M, InvestingPro’s Fair Value analysis suggests the stock is undervalued.
RBC Capital noted that its previous valuation used a 3.5x multiple, indicating increased confidence in the deal’s potential. The firm adjusted for NewCo’s estimated net debt and share count to reach its new $8 price target.
The research firm highlighted potential upside to synergy targets, particularly from manufacturing operations, as American Axle has not yet completed full diligence on Dowlais’s plants.
RBC Capital referenced American Axle’s 2017 MPG acquisition, where the company ultimately captured 5% of revenue synergies, exceeding its initial 3% target.
In other recent news, American Axle & Manufacturing reported its second-quarter 2025 earnings, surpassing earnings per share (EPS) expectations, though revenue did not meet forecasts. This development comes amid a series of analyst updates regarding the company. UBS raised its price target for American Axle to $7.50, maintaining a Buy rating, citing a positive outlook on the company’s business prospects, particularly in relation to General Motors’ production cycle and the U.S. emissions regulatory environment. Meanwhile, Stifel initiated coverage of American Axle with a Hold rating and set a price target of $6.00. In related news, RBC Capital downgraded Dowlais Group PLC from Outperform to Sector Perform, noting the stock’s proximity to American Axle’s bid price. These updates reflect recent developments in the automotive supplier industry.
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