Tuesday, B.Riley updated its financial outlook for Century Aluminum (NASDAQ:CENX) shares, raising the price target to $24 from the previous $19, while maintaining a Buy rating on the stock.
The firm adjusted its second-quarter adjusted EBITDA estimate for the aluminum producer from $32.5 million to $34.1 million. This revision reflects recent changes in the costs of major inputs used in aluminum production.
The analyst from B.Riley indicated that while there have been no updates from the U.S. Treasury regarding the inclusion of direct and indirect raw materials in production tax credits under Section 45X, any additional inclusions would likely serve as a significant positive catalyst for Century Aluminum. The company has previously stated that it could see an additional benefit of $50 million to $55 million if all material costs were to be included in these tax credits.
Looking ahead to the third quarter, B.Riley now projects an adjusted EBITDA of $62.9 million for Century Aluminum. The firm's revised price target of $24 reflects this optimistic outlook, suggesting a potential increase in the company's financial performance.
The adjustment in Century Aluminum's price target comes amidst expectations of continued improvement in EBITDA, influenced by pricing lags and current forward-looking estimates for the London Metal Exchange (LME) and regional premiums. The analyst's commentary underscores the potential for further financial growth for Century Aluminum in the upcoming quarter.
In other recent news, Century Aluminum has reported robust first-quarter earnings for 2024, with an adjusted EBITDA of $25 million. This figure surpassed both BMO Capital Markets and consensus estimates, which were $15 million and $13 million, respectively. Following these results, BMO adjusted its outlook on Century Aluminum, raising the price target to $16.00 from $15.00, while maintaining a Market Perform rating.
The company's guidance for its second-quarter EBITDA projects it to be between $25 and $35 million. However, the full benefits from the recent surge in aluminum prices are not expected to be realized until the third quarter due to lagged pricing. This delay indicates potential for further earnings improvement in the upcoming quarter.
Century Aluminum has also announced two significant growth projects, including a new casthouse and a green aluminum smelter in the US. These projects are expected to create thousands of jobs and enhance its market position.
BMO Capital Markets has acknowledged that these projects will likely necessitate significant capital investments but are anticipated to contribute positively in the longer term.
These are the recent developments in Century Aluminum's operations and financial performance.
InvestingPro Insights
In light of B.Riley's recent update on Century Aluminum's financial outlook, InvestingPro data and tips offer additional context that may interest investors. With a market capitalization of $1.55 billion and a notably low P/E ratio of 6.7, Century Aluminum appears to be trading at a value that could catch the eye of those looking for potentially undervalized stocks. Additionally, despite a decrease in revenue over the last twelve months, the company has shown a remarkable EBITDA growth of 143.03% during the same period, indicating significant improvements in earnings before interest, taxes, depreciation, and amortization.
InvestingPro Tips suggest that while the company is expected to grow its net income this year and has been profitable over the last twelve months, it also suffers from weak gross profit margins. Moreover, the stock has experienced a large price uptick over the last six months, with a 39.85% return, contributing to a strong return of 91.17% over the last year. These metrics underline the stock's volatility but also its high return potential, which aligns with B.Riley's optimistic price target adjustment.
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