March 22, 2018 / 11:42 AM / 9 months ago

BUZZ-MS likes American Axle, BorgWarner; double upgrades both

** Morgan Stanley double upgrades auto parts makers American Axle and BorgWarner to “overweight,” picks AXL as top auto supplier

** MS says investors seem to have a preference for shared, electric and autonomous vehicle suppliers rather than the traditional auto parts makers where the multiple is capped due to obsolescence risk

** However, N.America auto suppliers are trading at a premium to historical levels, while Goodyear Tire & Rubber and traditional suppliers are trading at a discount to historical levels - MS

** Longer term, electric vehicles and autonomous vehicles will be a transformational force in autos but investors may be too aggressive with respect to timing, MS says

** AXL’s guidance for >$1.5 bln of free cash flow from 2017-2020 is nearly equivalent to the market cap of the co, which means it could generate free cash flow beyond that point - MS

** BorgWarner may have room for positive estimate guidance revisions in the near term

** MS also recommends Adient, Goodyear Tire & Rubber, both rated “overweight”; downgrades Magna and double downgrades Visteon to “underweight”

** AXL up 2.6 pct, BWA 1.4 pct, GT 1 pct in light premarket volumes Thurs (Reporting by Medha Singh in Bengaluru)

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