Analysts are Optimistic about Century Aluminum – Here’s Why

Century Aluminum

Analysts have been increasing their price targets for Century Aluminum Company (NYSE:CENX) over the last couple of months, supported by the increasing production and improving market fundamentals for U.S. aluminum producers. Century Aluminum stock price increased sharply in the previous twelve months, and analysts see further upside in the days to come.

J.P. Morgan upgraded CENX stock price target to $29 with an ‘Overweight’ rating, citing potential growth from new tariffs and the restart of three potlines at its Hawesville, Ky., smelter that has been curtailed since mid-to-late 2015.

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Cowen analysts have also raised Century Aluminum price target to $30 from $23 and upgraded to an ‘Outperform’ rating from ‘Market Perform.’ The firm has highlighted confidence in the restart of 150K metric tons of capacity at its Hawesville, Ky. smelter.

The firm says, “the unlocking of spare capacity will drive CENX’s 2019 EBITDA 40% higher, and believes the company is conservative in expecting the restart to contribute $75M-$100M of incremental EBITDA when all three potlines are fully ramped by H2 2019, leading to an annual EBITDA run-rate of $375M-$400M.”

The company has also added to traders sentiments by posting a 20% sales growth in fiscal 2017 from the past year period. Its earnings jumped to $48 million in 2017, compared to a loss of $252 million in the previous year. The company’s aluminum production stood around 189,000 tonnes in fiscal 2017 and the inclusion of 150K metric tons from Hawesville, Ky. this year could significantly enhance its overall production potential levels.

Trump’s Tariffs on imported aluminum and sanctions on Russian imports provide support to Aluminum prices. Donald Trump has imposed higher tariffs on Russian aluminum this month, which is the second largest supplier of aluminum to the U.S. Aluminum price currently stands at the highest level since the start of this year amid Russian sanctions.

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