Morgan Stanley raises view on auto industry to ‘Attractive,’ hikes Johnson Controls, TRW

Sector Snap: Morgan Stanley upgrades auto parts

NEW YORK — Morgan Stanley raised its view of the auto industry Tuesday and upgraded Johnson Controls and TRW Automotive, saying it believes that margins in the sector will improve more quickly than previously expected.

Morgan Stanley lifted its outlook for the industry to “Attractive” from “In-Line.” It also upgraded TRW and Johnson Controls to “Overweight” from “Equal-weight.”

Analyst Ravi Shanker wrote that auto parts suppliers were forecast to be profitable at lower levels of production, but that recent strong margins should lead to better-than-expected results.

“This structural improvement in earnings power outweighs recent concerns over the fallout of European sovereign debt issues, which has weighed on stocks,” he wrote.

Morgan Stanley also noted that shares of Johnson Controls, TRW and BorgWarner Inc. are all potentially good buys following recent selloffs.

Shares of Johnson Controls rose $1.29, or 4.6 percent, to $29.27 in afternoon trading. TRW shares were up $1.71, or 5.4 percent, to $33.17. BorgWarner shares gained $2.20, or 5.7 percent, to $40.94.