New vehicle sales in the U.S. are expected to be announced on Tuesday and Wednesday this week. As highlighted in WSJ, sales are expected to register the best month of 2010. The cautionary footnote is that the overall sales improvement is not fast enough to please management teams looking for a "normal" recovery.
Reading further into the article, it highlights that truck sales should continue to improve at a rate faster than the industry. Should this in fact occur, I believe it would provide a nice bump to AXL since the majority of the company's sales are incorporated into trucks. Of course, a lower-than-expected sales number could further hurt the stock.
AXL trades at 6.5x the 2011 consensus EPS estimate, a relatively low multiple that appears to heavily consider the financial leverage (~3x EBITDA) and mixed economic outlook. As a result of the low multiple, I believe the stock is quite attractive in light of my assumptions of an improving economy and potential of growing inflation.
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