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Century (CENX) Down 21.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Century Aluminum (CENX). Shares have lost about 21.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Century due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Century Aluminum's Earnings, Sales Beat Estimates in Q2

Century Aluminum recorded a net loss of $20.7 million or 23 cents per share in second-quarter 2019, against a profit of $19.4 million or 20 cents in the year-ago quarter.

The bottom line in the reported quarter was hurt by a $9-million charge for net realizable value of inventory adjustments and a $4.3-million loss on the sale of the company’s investment in BHH located in China.

Barring one-time items, adjusted loss was 17 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 29 cents.

The company logged revenues of $473.1 million in the quarter, down around 0.7% year over year. The figure beat the Zacks Consensus Estimate of $465.1 million.

Shipments & Pricing

Shipments of primary aluminum were 203,380 tons, up around 13% year over year. On sequential comparison basis shipment fell 1% due to timing of deliveries.

The company saw lower London Metal Exchange (LME) aluminum prices in the reported quarter compared to the previous quarter. Cash LME prices averaged $1,793 per ton in the quarter, down 4% on a sequential comparison basis.

Financials

At the end of the quarter, the company had cash and cash equivalents of $25.7 million, down around 79% year over year. Net cash used in operating activities was $25.6 million for the first half of 2019.

Outlook

Per management, demand for aluminum products remains strong in the United States. The company noted that global aluminum inventories have been declining steadily and have fallen to historically low levels.  

The company sees an aluminum supply deficit of more than 1 million tons globally for full-year 2019. It expects the supply deficit to result in the sustained de-stocking of inventories and lead to higher LME aluminum prices over the long term. Century Aluminum also noted that alumina prices have declined to a level which it believes to be in the historical fair value range.

The company also said that its rebuild program at the Hawesville plant remains on schedule and budget. It expects to return the plant to its full production capacity next year.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Century has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Century has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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