According the the NASDAQ analysts, the American Auto industry is indeed looking up after several tough years of losses.
All in all, things appear to be heading up, at least a bit, although the industry is not back to it’s strong points of several years ago and the employment rate in the automotive industry remains down.
While the US economy is growing, employment is still lower than people would like. The economies of Europe and China are also weak, which hurts exports to those countries. Overall, the auto industry should grow about 3% in the 2014. Sales are up, but they are not fully recovered and the average vehicle on the road is over 11 years old, a record age.
American Axle (AXL) provides many of the axles that go into American cars. Sales go hand in hand with the auto industry. When the crisis hit, sales fell, but as the recovery came they returned. In 2012, American Axle did $3.2 billion in sales, more than twice the $1.52 billion in did in 2009 at the low the crisis. The company is still below 2007 and 2004 ($3.6 b) levels. Profits have followed revenues.While the company lost $23.73 a share in 2008, in 2012 the company made $4.87. In 2013, the company pulled in smaller profits of $1.23. Earnings have continued into 2014 with the company reporting $0.44 in the first quarter passing estimates of$0.40 and last year’s comparable profits of $0.23.
Car sales are up and the industry has been in recovery for a while. Sales have tapered off some since supply has caught up with demand, but the record age of cars means more people may still want a new car. Fulfilling that dream is going to take time, and we should not expect instant results. Looking at the data, we might easily invest in AXL but then turn around and sel la covered call to bring in some extra returns on the position. A covered call could boost returns by 7.2% over the next 163 days.
See full story on nasdaq.com
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You can also read Ride With the Auto Industry – Looking Up on Car Interstate Transport.
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