AA - Century Aluminum sinks as Wolfe cuts to Sell equivalent on weak pricing outlook
2023-07-11 12:24:25 ET
Century Aluminum ( NASDAQ: CENX ) -10.1% in Tuesday's trading as Wolfe Research downgraded the stock to Underperform from Peer Perform with a $6 price target, citing weak aluminum prices and high leverage.
Wolfe's more cautious 12-month view on aluminum prices reflects soft demand across end markets, rising output from Yunnan, China, as drought conditions abate, and continued packaging destocking.
On Century Aluminum ( CENX ), Wolfe said it used 8x estimated FY 2024 EV/EBITDA, the high end of its prior 6x-8x EV/EBITDA range, to reflect its worsened aluminum price outlook.
Higher net debt and more cash needs for the recent Jamalco alumina refinery purchase can extend Century Aluminum's ( CENX ) already relatively steep 5.1x leverage, with $28.5M land sale proceeds delayed into H2, Wolfe said.
Wolfe also cut Alcoa ( AA ) to Underperform from Peer Perform with a $25 target, using 7x estimated 2024 EV/EBITDA, up from its ~6x historical average to reflect expected challenging aluminum markets ahead.
More on Century Aluminum:
- Financial and valuation comparison to sector peers
- Analysis: Century Aluminum: Upside Potential Is Currently Idled
- Stock price return: Down 3.5% YTD, up 18% in the past 12 months
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Century Aluminum sinks as Wolfe cuts to Sell equivalent on weak pricing outlook