6 Durable-Goods Stocks with Upside

NEW YORK (TheStreet) -- As investors grapple with the likelihood of economy slowing down further, the latest data for U.S. durable-goods orders have been encouraging. Orders for durable goods in the U.S. rebounded to 4% in July after declining 1.3% in June, driven by surging demand for autos and aircraft. The initial forecast was a 1.9% rise.

Durable-goods orders in July were built on a 14.6% jump in demand for transportation equipment. Auto demand in the U.S. also jumped 11.5% in July, while Boeing's big order from American Airlines surged aircraft bookings by 43.4%.

We have selected six stocks that could benefit from a recovery in durable goods demand. Analysts foresee up to 91% upside potential for these stocks, based on 12-month target price and buy rating of 75%.

6. General Motors ( GM) is one of the world's largest automakers with business interests in more than 120 countries.

During second quarter 2011, the company reported net income of $2.5 billion - its sixth consecutive profitable quarter. For the same period in 2010, GM's net income was $1.3 billion.

Revenue increased to $39.4 billion, up $6.2 billion from the second quarter prior year. Earnings before interest and tax increased to $3 billion from $2 billion in the same quarter of 2010.

"Our progress has been steady and we're preparing to launch more new products this year, including the Chevrolet Sonic in North America, the Opel/Vauxhall Zafira in Europe and the Baojun 630 in China to keep the momentum going," said Dan Akerson, GM's CEO. Analysts surveyed by Bloomberg project 84% upside over the next one year with 75% buy ratings.

5. Goodyear ( GT) manufactures and sells tires and related products and services to customers worldwide.

Goodyear delivered its best quarterly sales ever for the second quarter for 2011, increasing 24% to $5.6 billion from the year-ago period. Tire unit volumes totaled 42.9 million, down 2%; however, strong price-mix improvements drove revenue per tire up 18% during the quarter.

For the quarter, the company's operating income stood at $382 million, up $163 million from the prior-year quarter. The company's operating income reflected improved price realization, offset somewhat by higher raw material costs. Net income for the quarter was $40 million, vs. $28 million in the corresponding quarter of 2010.

Goodyear expects raw material costs to increase more than 30% for the remainder of 2011. In view of reduced outlook for the U.S. consumer replacement industry and second quarter volumes, the company expects unit volumes to increase around 3% to 5% for the year. Analysts polled by Bloomberg have 73% buy rating for the stock and project an estimated 85% upside over the next one year.

4. TRW Automotive Holdings ( TRW) is one of the world's leading automotive suppliers.

The company reported second quarter 2011 revenue of $4.2 billion, up 16% from the prior year period, driven by improved vehicle production volumes, increased demand for TRW's safety products and the positive currency impact.

For the quarter, operating income was $368 million, vs. $322 million in the corresponding quarter of 2010. Operating income includes a favorable resolution of a commercial matter amounting to $19 million, although largely offset by higher raw material costs prices. Net income increased to $293 million as compared to $227 million delivered during the same period of 2010.

The company expects full-year production of 13 million units from North America and 20 million units in Europe. For full-year 2011, sales are estimated to range from $16.2 billion to $16.4 billion. Analysts surveyed by Bloomberg peg the stock's average gains at 90% over the next one-year and have 82% buy ratings.

3. Ford Motor Company ( F) is one of the largest manufacturers of cars and trucks in the world.

For the second quarter of 2011, the company reported revenue of $35.5 billion, increasing $4.2 billion from the same quarter prior year. Operating profit was $2.3 billion, vs. $209 million in the second quarter 2010. For the quarter, the company earned net income of $2.4 billion.

Ford reduced automotive debt by $2.6 billion in the second quarter as a result of payments on its term loans and full repayment on its revolving credit line. The company's automotive gross cash exceeded debt by $8 billion, an improvement of $6.6 billion during the first half of 2011. For the second quarter of 2011 the company had automotive gross cash of $22 billion.

The company expects total third-quarter production at 1.4 million units, up 92,000 units from the year-ago quarter. Analysts surveyed by Bloomberg expect the stock to gain 83% over the next one-year and affirm 70% buy ratings.

2. Lear Corporation ( LEA) is a global automotive player engaged in the manufacture of automotive seat systems and electrical power management systems.

For the second quarter of 2011, Lear reported net sales of $3.7 billion, vs. $3 billion in the same period 2010, a growth of 23%. The seating segment saw net sales increase by 19% to $2.9 billion, while the electrical power management systems segment observed 29% sales growth to $816.4 million.For the quarter, pretax income rose to $205.4 million from $182.6 million, while adjusted earnings per share was $1.65 per share compared with $1.47 in the second quarter of 2010

During the quarter, free cash flow was $121.0 million, and net cash from operating activities was $206.7 million. Capital spending in 2011 is estimated at $325 million, reflecting further investment plans in emerging markets.

Lear expects 2011 net sales to range from $13.4 to $13.8 billion and operating earnings between $740 million and $780 million. On average, analysts expect the stock to gain 49% over the next one year. The stock has 81% buy rating.

1. Tenneco ( TEN) manufacturers emission control and ride-control products and systems for the automotive original equipment market.

Net income for 2011 second quarter was reported at $50 million, up 25% from the same quarter prior year. Original equipment volumes and increased volumes from higher-margin light and commercial vehicle business improved adjusted EBIT to $115 million as compared to $97 million a year ago.

The company's leverage ratio, which is the ratio of net debt to adjusted EBITDA, was 2 times, down from 2.3 times as of June 30, 2010. Tenneco is expected to launch diesel after-treatment programs with 13 commercial vehicle and engine manufacturers globally. During the quarter, capital expenditure increased to $47 million from $30 million in the prior year period owing to investments in new manufacturing facilities in China and the start of commercial vehicle emission control business in Europe and South America. For full-year 2011, capital expenditure is estimated between $190 million and $210 million.

Analysts polled by Bloomberg project 63% upside over the next one-year with 67% buy ratings. The stock is trading at 8 times its estimated 2011 earnings.

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