On Friday, Benchmark reiterated its Buy rating on shares of Constellium (NYSE:CSTM) with a price target of $24.00. The firm's stance remains positive despite Airbus's recent announcement to reduce its FY24 delivery target to 770 from 800 and delay the A320/A321 production ramp up to 75 per month until FY27. This adjustment in Airbus's schedule has raised concerns about the potential impact on Constellium's aluminum plate deliveries.
Constellium is significantly exposed to Airbus's airframe build rates within the Aerospace Materials sector. The reduced production by Airbus is attributed to shortages of engines, airframes, and seats. However, Benchmark believes that these constraints make a dramatic reduction in aluminum plate orders unlikely, though some adjustments may be expected.
The company is also navigating through the repercussions of recent flooding in Europe, which may affect certain aerospace applications. Despite these challenges, Constellium is anticipated to sustain its guidance largely due to a projected strong recovery quarter for its packaging exposure, bouncing back from issues faced in the first quarter.
Benchmark's forecast for Constellium's first-quarter earnings in 2024 stands at $187 million, which is slightly above the consensus estimate of $184 million among other analysts. Additionally, Constellium's ongoing execution of its $300 million buy-back program is seen as a positive factor in maintaining investor confidence in the company's stock performance.
In other recent news, aluminum manufacturer Constellium has reported a mixed financial performance for the first quarter of 2024. Despite a 12% decrease in revenue to €1.7 billion, attributed to lower metal prices and a 2% reduction in shipments, the company saw a record first quarter in its Aerospace and Transportation segment with a 10% increase in adjusted EBITDA. Net income, however, declined to €17 million from €22 million in the same quarter the previous year.
In other developments, Moody's (NYSE:MCO) upgraded Constellium's credit rating to BA3 with a stable outlook. The company also repurchased 330,000 shares for $7 million with $293 million remaining in its share repurchase program.
Despite a challenging market environment, the company remains optimistic about its long-term prospects, especially in the packaging and automotive markets, and is committed to returning capital to shareholders.
Notably, the company expects to generate positive free cash flow of over €130 million for the full year and has no bond maturities until 2026.
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