On Thursday, BMO Capital Markets adjusted its outlook on Century Aluminum (NASDAQ:CENX) shares, increasing the price target to $16.00 from the previous $15.00, while keeping a Market Perform rating.
The decision follows Century Aluminum's reported first-quarter earnings for 2024, which revealed an EBITDA of $25 million, surpassing both BMO's and the consensus estimates of $15 million and $13 million, respectively.
The company has provided guidance for its second-quarter EBITDA, projecting it to be between $25 and $35 million, which aligns with current expectations. However, Century Aluminum is not expected to fully realize the benefits from the recent surge in aluminum prices until the third quarter due to lagged pricing. This delay suggests potential for further earnings improvement in the upcoming quarter.
Century Aluminum, known for its aluminum production, has a strong lineup of future projects that are anticipated to contribute positively in the longer term. However, these projects are likely to necessitate significant capital investments, as assessed by BMO Capital Markets. The firm has revised its near-term estimates for the company after adjusting for market prices, leading to the updated price target of $16.
The company's robust pipeline and the anticipated improvement in earnings due to higher aluminum prices have been key factors in BMO's reassessment of Century Aluminum's stock potential. The updated price target reflects a modest increase, with BMO maintaining a neutral stance on the stock's performance outlook.
InvestingPro Insights
As BMO Capital Markets reevaluates Century Aluminum's potential, real-time data and insights from InvestingPro offer additional context for investors. Century Aluminum's market capitalization stands at approximately $1.48 billion, showcasing its notable presence in the industry. Despite concerns over profitability, with analysts not expecting the company to turn a profit this year, the stock has experienced a significant price uptick, with a 134.41% return over the last six months and a 93.36% return over the past year. This performance is reflected in the company's strong return on assets, which reached 13.41% for the last twelve months as of Q1 2024.
The stock's price-to-earnings (P/E) ratio of 7.46 indicates a lower valuation compared to the broader market, but an adjusted P/E ratio based on the last twelve months suggests a much higher valuation, potentially signaling mixed sentiment among investors. Moreover, Century Aluminum's gross profit margin stands at 2.84%, highlighting the InvestingPro Tip that the company suffers from weak gross profit margins.
For investors seeking a deeper analysis, InvestingPro offers additional tips, including insights on the company's high EBIT and EBITDA valuation multiples, and the fact that Century Aluminum does not pay a dividend to shareholders. With these InvestingPro Tips in mind, investors can make more informed decisions, and those interested in a comprehensive investment tool can access more tips on InvestingPro by using the coupon code PRONEWS24 to get an extra 10% off on a yearly or biyearly Pro and Pro+ subscription.
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