On Tuesday, Wolfe Research upgraded shares of Century Aluminum (NASDAQ:CENX) from Peerperform to Outperform, setting a new price target of $27.00. The upgrade comes as the stock has delivered an impressive 170% return over the past year, according to InvestingPro data. The upgrade reflects a positive outlook based on higher commodity price forecasts for aluminum and the potential sale of a significant power connection at the company's currently inactive Hawesville smelter.
The analyst noted that the upgrade occurred despite Century Aluminum's strong year-to-date performance of nearly 87%. The firm anticipates an increase in the company's fourth-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) to $82 million, up from the previously estimated $73 million. This follows the company's last twelve months EBITDA of $185.5 million. Expectations for the company's 2025 EBITDA have also risen, now forecast at $342 million, a significant increase from the earlier $265 million projection.
The optimism surrounding Century Aluminum is partly due to the company's ability to benefit from higher alumina prices, which more than doubled in 2024. This is attributed to Century Aluminum's mid-2023 investment in Jamalco, which provides a hedge against rising alumina input costs. The analyst suggests that higher alumina costs are likely to bolster aluminum prices, especially as smelters in China and Russia have closed in response to high expenses.
The analyst acknowledged the viewpoint of those skeptical about the sustainability of the recent alumina spot price, which reached $787 per ton. However, the analyst argued that prolonged periods of low alumina prices have led to a lack of investment in refinery capacity.
Additionally, challenging bauxite mining conditions in Australia and Guinea are expected to maintain elevated input costs over an extended period. InvestingPro analysis shows the company currently trades at a P/E ratio of 6.85x, with analysts expecting continued profitability this year. Get access to 10+ additional exclusive ProTips and comprehensive financial analysis for Century Aluminum through InvestingPro's detailed research reports.
In other recent news, Century Aluminum has reported strong third-quarter earnings, with an adjusted EBITDA of $104 million, attributed to improved aluminum prices and the benefit of new Section 45X tax credits. The company also recorded shipments of approximately 169,000 tons and net sales of $539 million.
Looking forward, Century Aluminum provided an EBITDA guidance range of $70 million to $80 million for the fourth quarter of 2024. BMO Capital has adjusted its price target on Century Aluminum's shares to $18.00, up from the previous $16.00, while maintaining a Market Perform rating. The firm has raised its estimates for Century Aluminum, considering updated market prices and the additional 45X credit.
Furthermore, Century Aluminum is undergoing a strategic alternatives review for the idled Hawesville smelter, which could impact future operations and financial outcomes. Lastly, the company is also exploring the potential redevelopment of its Hawesville facility and the competitive cost structure of the Jamalco alumina asset."
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