Federal-Mogul Shares Fall After Analyst Downgrade

NEW YORK (AP) — Federal-Mogul Corp. fell Friday after an analyst downgraded shares of the auto parts supplier because of his view that shares of other such companies offer better opportunities.

Goldman Sachs analyst Peter Archambault downgraded Federal-Mogul shares to "Neutral" from "Buy," saying his $16 price target implies a potential upside of 23 percent.

That is less, however, than the 38 percent potential upside he calculates for shares of Goodyear Tire & Rubber Co.

He also said that Federal-Mogul's dependence on the pace of economic recovery in Europe constitutes a risk for shareholders.

Federal-Mogul, which makes powertrain and safety components for cars, has suffered over the past year from falling car production.

But cost reductions have helped boost its profitability, and by the end of the third quarter the Southfield, Mich., company had cut its work force by 11,000 employees, or 22 percent.

Such moves led Archambault to a generally positive long-term view of the company, whose shares he upgraded to "Buy" on March 4 of last year.

"We continue to see Federal-Mogul shares as a good value at current prices with a free cash flow yield of 8 percent on our 2010 estimates," he said.

In afternoon trading, the stock fell 76 cents, or 5.8 percent, to $12.26.