On Wednesday, Deutsche Bank adjusted its price target for shares of Constellium (NYSE:CSTM), a manufacturer of aluminum products and solutions, to $22.00 from the previous target of $23.00, while reiterating a Buy rating on the stock.
The adjustment comes amid concerns regarding the demand trends for most of the end-markets that Constellium serves, which appear to have weakened during the third quarter, particularly in Europe and the United States, especially within the Industrials sector. The analyst also noted ongoing operational inefficiencies at the company's Muscle Shoals facility.
According to Deutsche Bank, current market estimates for the company's financial performance are likely too optimistic, and revisions downwards by the sell-side analysts should be anticipated. The bank expressed skepticism towards Constellium's 2025 EBITDA guidance of €800 million, considering the potential year-over-year bridge of up to €100 million but also acknowledging the negative impact of macroeconomic conditions.
Deutsche Bank forecasts a 2024 adjusted EBITDA (excluding metal price lag) for Constellium at €675 million, which casts doubt on the company's ability to meet its 2025 guidance. The outcome is expected to be highly influenced by the macroeconomic environment and potential improvements in early 2025.
The new price target of $22 is based on a revised 2025 adjusted EBITDA estimate of €784 million, which is down 2% from previous estimates. The price target calculation continues to apply a 6.0x EV/EBITDA multiple for the year 2025. The firm anticipates that more details will be provided during Constellium's third-quarter earnings call, with clearer visibility likely to emerge with the fourth-quarter results in early 2025.
In other recent news, Constellium SE has announced its financial results for Q2 2024, noting a decrease in revenue but an increase in net income compared to the same period last year.
The company has also announced the appointment of Bradley L. Soultz as Special Advisor to its Board of Directors. In addition, Constellium has announced a dual-currency private offering of senior unsecured notes, including €300 million in euro-denominated notes and $350 million in U.S. dollar-denominated notes, both due in 2032.
The company remains optimistic about achieving an adjusted EBITDA of over €800 million by 2025. The appointment of Soultz is expected to enhance Constellium's strategic planning and global operations. These developments provide insights into the company's recent performance and its strategic direction.
InvestingPro Insights
To complement Deutsche Bank's analysis of Constellium (NYSE:CSTM), recent data from InvestingPro offers additional context. As of the last twelve months ending Q2 2024, Constellium reported a revenue of $7.35 billion, with a gross profit margin of 10.02%. This aligns with one of the InvestingPro Tips, which notes that the company "suffers from weak gross profit margins."
Despite these challenges, Constellium's P/E ratio stands at 13.32, suggesting a relatively modest valuation compared to some peers. This is further supported by another InvestingPro Tip indicating that the "valuation implies a strong free cash flow yield." This could be seen as a potential opportunity for investors, especially considering that analysts predict the company will be profitable this year.
It's worth noting that management has been aggressively buying back shares, which may signal confidence in the company's future prospects. For investors seeking more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Constellium's financial health and market position.
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