Bank of America Merrill Lynch downgraded several auto supplier stocks, citing lower than anticipated U.S. auto sales this year.

WHAT'S NEW: Noting that U.S. auto sales have been weaker than expected so far in 2016, Bank of America analyst John Murphy cut his 2016 U.S. auto sales estimate to 17.7M from 18.2M. Given this change, Murphy favors companies with "late cycle tailwinds," including those with high exposure to fleet sales. Among suppliers, he recommends those companies with exposure to parts that are becoming more prevalent in autos. As a result of these criteria, Murphy downgraded American Axle  (AXL - Get Report) , BorgWarner  (BWA - Get Report) , Lear  (LEA - Get Report) , and Metaldyne  (MPG) to Neutral from Buy. He also cut his rating on Cooper-Standard  (CPS) to Underperform from Neutral. Murphy added that investor sentiment towards the auto supplier companies has become more negative, leading him to expect all of the stocks he downgraded to trade at relatively low multiples. Additionally, BorgWarner looks set to suffer from "muted" revenue and profit growth going forward, while Cooper-Standard still has "several steps" remaining in its turnaround, which will not deliver significant returns for some time, Murphy stated. He cut his price target on American Axle to $20 from $27.50, on Lear to $145 from $150, on Metaldyne to $20 from $26, and on Cooper to $85 from $86.

AUTO MAKERS: Publicly traded auto makers include Daimler AG  (DDAIF) , Fiat Chrysler  (FCAU - Get Report) , Ford  (F - Get Report) , General Motors  (GM - Get Report) , Honda  (HMC - Get Report) , Nissan  (NSANY) , Toyota  (TM - Get Report) and Volkswagen  (VLKAY) .

PRICE ACTION: In early trading, American Axle sank 6.75% to $15.33 Metaldyne retreated 5% to $15.70, Lear gave back 3% to $114, BorgWarner slid 4.4% to $33.22, and Cooper-Standard lost 4.6% to $81.50.

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