American Axle & Manufacturing Holdings, Inc. AXL, a leading supplier of driveline and drivetrain systems, modules and components for the light vehicle market, expects declines in North American light vehicle production, massive capital expenditures and high debt level to act as major headwinds.

Let’s see why you should consider offloading this Zacks Ranks #4 (Sell) stock from your portfolio.

Lower Expected Vehicle Production to Ail American Axle

A bleak outlook for 2025 sales clouds AXL’s prospects. It expects sales in the range of $5-$6.05 billion compared with $6.12 billion in 2024 due to expected declines in North American light vehicle production. 

American Axle needs to make massive capital expenditures to develop technologically advanced products to adapt to the changing dynamics of the auto space, which might impact its cash flow. The company expects capital expenditure of $300 million in 2025 compared with $242 million made in 2024.

As of Dec. 31, 2024, the company’s net long-term debt amounted to $2.58 billion, as compared to cash and cash equivalents of $552.9 million. Its total debt-to-capital ratio stands at 0.81, higher than its industry's 0.25. Elevated leverage restricts its financial flexibilities to tap onto growth opportunities.

AXL relies heavily on GM, Stellantis and Ford. GM accounted for 42% of its 2024 sales, and Stellantis and Ford each contributed 13%. A decline in sales to these automakers or reduced production of supported vehicle programs due to market share losses could significantly impact the company’s financial performance.

Electrification Strategy & Acquisitions to Aid AXL’s Growth

American Axle has adopted multiple strategies to stay afloat amid these testing times. It has partnered with Inovance to boost electrification. Recent launches, including eDrive units and EV components, highlight its growth in electric propulsion. While past business quotes focused on electrification, ICE and hybrid applications now dominate. AXL is actively pursuing $1.5 billion in new opportunities. Portfolio optimization efforts, including the Metaldyne acquisition and impending divestiture of its India commercial axle unit, enhance focus. The recent deal to acquire Dowlais is expected to bolster capabilities, drive high-margin growth and improve financial strength, solidifying AXL’s leadership in driveline and metal-forming solutions.

Stocks to Consider

Some better-ranked stocks in the auto space are Geely Automobile Holdings Limited GELYY, Dana Incorporated DAN and Garrett Motion Inc. GTX. While GELYY & DAN sport a Zacks Rank #1 (Strong Buy) each, GTX carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings indicates year-over-year growth of 66.62% and 149.31%, respectively. EPS estimates for fiscal 2025 and 2026 have improved by 15 cents and 38 cents, respectively, in the past 60 days. 

The Zacks Consensus Estimate for DAN’s 2025 earnings implies year-over-year growth of 79.17%. EPS estimates for 2025 have improved by 20 cents in the past 30 days.

The Zacks Consensus Estimate for GTX’s 2025 sales and earnings indicates year-over-year growth of 2.16% and 17.92%, respectively. EPS estimates for 2025 have improved by a penny in the past 30 days.

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American Axle & Manufacturing Holdings, Inc. (AXL) : Free Stock Analysis Report

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