Dana shares soar as analyst upgrades shares

PITTSBURGH - Dana Holding Corp. stock surged Friday as an analyst upgraded the company's shares, citing the company's improved liquidity.

Shares of Toledo, Ohio-based Dana shot up 40 cents, or 32 percent, to $1.65 in midday trading.

In a note to investors, Barclays Capital analyst Brian A. Johnson upgraded Dana's shares to "Overweight." The move reflected "our growing confidence that (Dana) will be able to avoid breaching its debt covenants, enabling investors to focus back on the fundamentals and recovery earnings power," he wrote in a note to investors.

Dana "has solid liquidity, but the stock's valuation has been impacted by a large perceived risk of breaching covenants, which would allow its lender group to push the company into Chapter 11" bankruptcy protection, Johnson wrote.

While Barclays does not forecast any meaningful volume recovery in the near-term, it expects a material rebound in Dana's earnings starting in the second quarter of 2009, Johnson wrote, driven by the company's deep cost cuts earlier this year, as well as a pickup in Ford Motor Co.'s production levels.

"This improvement, combined with the recent buyback of 10 percent of its debt, should enable (Dana) to clear its covenants, in our view," wrote Johnson, who raised Dana's price target to $3.50 from $2.

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