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Auto-Suppliers Rev Up on Emission Rules

The auto-supplier sector is being presented with new opportunities and a chance to fix the damage the global economic downturn wreaked on its businesses.
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NEW YORK (

TheStreet

) -- The consensus of most auto-industry analysts is that the worst is over for the auto-supplier sector. As the global economy begins to pick up and emission-control restrictions around the world become stricter, the auto-supplier sector is being presented with new opportunities and a chance to fix the damage the global economic downturn wreaked on its businesses.

While there hasn't been any specific news driving up

Tenneco

(TEN) - Get Report

stock today, Standard & Poor's equity analyst Efraim Levy says that he's seen some automotive-related parts suppliers rally recently because of higher production and sales forecasts from customers

General Motors

and

Ford

(F) - Get Report

for the fourth quarter fiscal 2009 and first quarter fiscal 2010.

"So higher production is good new for parts suppliers," including Tenneco, Levy said. He's given the auto-supplier on a hold rating.

Since Tenneco sells automotive-emission control systems and products, new emission regulations around the world and the global economy recovery is also pushing up the stocks value for investors, Levy explains.

Tenneco jumped 5.4% to $18.50 at the end of Monday's trading session.

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At the same time,

ArvinMeritor

(ARM)

stock gained 4.2% to end the session at $11.50.

"

ArvinMeritor is a momentum stock right now," says Wall Street Strategies analyst David Silver. "All of the technical aspects -- you can go down the list and just check it off," he says, praising its improving fundamentals.

Silver has a buy rating for the stock at a $15 price target, which was raised from the previous target of $11. The company recently divested its entire light vehicle-sales unit to focus its commercial vehicle and industrial operations; and although investors still need some time to get their heads around where the company is heading, they can still go down a list and check all the boxes for the company's positive factors.

They include its large market share in the U.S.; its strong and growing presence in Asia and Latin America; the popularity of its axles for large, six-wheel vehicles; and its long-standing contracts to supply axles to military vehicles. The spike activity in Afghanistan a few weeks ago also gave the company a boost. Silver pointed out that improving economies around the world means that "China and Germany is really investing in the armed forces," Silver. These days they have more wiggle room for cash."

Silver also has a buy recommendation for TRW Automotive at a $29 price target. Shares of TRW sunk 2.1% to $24.10."TRW made a great move over that past three to four months, and now the market is taking profits," Silver explained.

-- Reported by Andrea Tse in New York

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