BMO Capital has adjusted its price target on shares of Constellium (NYSE: NYSE:CSTM), a manufacturer of specialty rolled and extruded aluminum products.
The firm reduced the price target to $18.00 from the previous $22.00 while continuing to recommend the stock as Outperform.
This adjustment comes in response to Constellium's third-quarter performance and forecast, which did not meet expectations.
Constellium has encountered difficulties due to weakening demand in its end markets and supply chain obstacles. Despite these challenges, BMO Capital views the issues as cyclical rather than structural. The firm believes Constellium possesses several factors that could potentially support its earnings in 2025.
The analyst from BMO Capital acknowledges that Constellium's situation requires the company to demonstrate its ability to overcome current challenges, a process that is expected to take time. Nevertheless, the analyst suggests that the recent decline in the stock's value might be an overreaction to the company's short-term hurdles.
Constellium's third-quarter results have led to a reassessment of expectations by BMO Capital, prompting the new price target based on approximately 6.0 times the projected 2025 Enterprise Value to EBITDA (EV/EBITDA) ratio.
In other recent news, Constellium has faced challenges due to a decrease in demand across most of its markets. This has led to a revision in its 2024 Adjusted EBITDA guidance to €580-600 million, as reported in its third-quarter results. Deutsche Bank responded to these developments by downgrading Constellium's stock from Buy to Hold and significantly reducing the stock's price target to $12 from the previous $22.
The bank's analyst anticipates these challenges will continue over the next few quarters until a potential improvement in demand across most of the company's end markets. Amid these difficulties, Constellium's third-quarter results showed a 5% year-over-year decrease in shipments to 352,000 tons and a 5% decrease in revenue to EUR 1.6 billion. Net income was reported at EUR 3 million.
In addition to these financial outcomes, Constellium repurchased 1.2 million shares for US $21 million in Q3 and began operations at its new Recycling and Casting Center in Neuf-Brisach ahead of schedule. Despite the current market headwinds, the company remains committed to safety, cost management, and strategic growth.
InvestingPro Insights
Recent InvestingPro data provides additional context to BMO Capital's analysis of Constellium (NYSE:CSTM). The company's stock has experienced significant declines, with a 27.7% drop in the past week and a 38.51% fall over the last three months. This aligns with BMO Capital's observation of the stock's recent decline, which they suggest might be an overreaction to short-term challenges.
Despite these setbacks, InvestingPro Tips highlight that management has been aggressively buying back shares, indicating confidence in the company's long-term prospects. This action could potentially support the stock price and aligns with BMO Capital's view that the current issues are cyclical rather than structural.
The company's P/E ratio of 20.4 and Price to Book ratio of 1.62 suggest that while the stock has taken a hit, it may not be severely overvalued. Additionally, an InvestingPro Tip notes that the stock's valuation implies a strong free cash flow yield, which could be attractive to value-oriented investors.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Constellium, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.