The rising demand for renewable energy and electrification has increased the interest in advanced aluminum alloys and green aluminum products. This, combined with a recovery in demand in Europe and China, and sanctions on Russian aluminum and other metals by the U.S. and U.K., has put Century Aluminum (NASDAQ:CENX) in a prime position. The company is expected to benefit from the confluence of these trends and continue its long-term growth.
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The stock is up over 75% in the past 90 days. However, it still trades at a relative discount, making it an intriguing opportunity for value investors looking for positive momentum and a potential increase in value.
Century Aluminum’s Expanding Operations
Century Aluminum is a prominent global producer of bauxite, alumina, and primary aluminum. The company’s aluminum conversion facilities are spread across the United States, Jamaica, and Iceland. It operates three smelters in Kentucky and South Carolina and has an aluminum smelter in Grundartangi, Iceland, supplemented by a carbon anode facility in Vlissingen, Netherlands. Finally, the company runs bauxite mining operations and an alumina refinery in Clarendon, Jamaica.
Century Aluminum plans to expand its operations by building a new 250 million-pound secondary billet casthouse in partnership with MX Holdings in the Ohio Valley region. Upon completion in 2026, this casthouse will be the largest American-owned secondary billet casthouse.
Additionally, the company plans to construct a state-of-the-art green aluminum smelter in the U.S. This project has been selected by the U.S. Department of Energy to receive up to $500 million as part of the industrial demonstrations program.
Analysis of Century Aluminum’s Recent Financial Results
Century Aluminum recently reported quarterly financial results. Revenue was slightly below expectations, reaching $489.50 million, 0.64% less than the projected $492.65 million. However, earnings per share (EPS) of -$0.03 beat analyst estimates of -$0.17.
The company finished the quarter with a liquidity position comprising cash and cash equivalents and combined borrowing availability of $302 million, a decrease of $10.5 million from the previous quarter.
Looking ahead to Q2, the company anticipates lagged London Metal Exchange (LME) pricing to increase by about $75 per tonne compared to Q1 realized prices. Based on the forecast of increased LME prices and regional premiums, Century Aluminum expects adjusted EBITDA to range between $25 and $35 million, representing an estimated increase in Q2 EBITDA by about $15 million versus Q1.
What Is the Price Target for CENX Stock?
The stock is thinly followed, though the analysts that do follow the company have been cautiously optimistic. For example, B. Riley analyst Lucas Pipes recently raised the share price target from $13 to $19 while maintaining a Buy rating, citing expectations for growing revenue through the end of 2024.
Century Aluminum is rated a Moderate Buy based on two Wall Street analysts’ recommendations and price targets over the past three months. The average price target for CENX stock is $17.50, representing a -1.96% change from current levels.
The stock has been trending upward over the past year, climbing over 122%. It currently sits at the high end of its 52-week price range of $5.70-$18.64 and continues to show positive price momentum, trading above the 20-day (17.11) and 50-day (15.74) moving averages. The stock appears to be relatively undervalued, with a P/E ratio of 8.2x favorably compared to the Aluminum industry average of 10.5x.
CENX in Summary
Supply and demand dynamics in the aluminum market favor producers like Century Aluminum, and the stock has been trending up on expectations those dynamics will translate into growing profitability for the company. The added expansion of operations only serves to heighten those expectations. The stock trades at a discount, making it an intriguing option for value investors looking for a potential long-term growth story.
