) to overweight from neutral on low bankruptcy risk.
Analyst Himanshu Patel says that he thinks Delphi offers significant upside potential with a likely GM/UAW bailout and start of broader capacity reductions. He says a Delphi bankruptcy risk is at 25%, a compelling risk-reward for contrarian investors.
Patel believes a GM/UAW deal could potentially boost the auto parts maker's earnings per share by as little as $1.00, up to $2.60, as longer-term flexible labor rules could lead to capacity cuts and better utilization rates. He says Delphi could achieve sector-average EBITDA margin of around 8% implying roughly $1.00 of EPS before any future de-leveraging benefits.