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Kaiser Aluminium Posts Weak Q3 Results; Shares Fall 5.7%

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Shares of semi-fabricated specialty aluminum products manufacturer Kaiser Aluminum Corporation (KALU) declined 5.7% in extended trade on Wednesday and closed at $107.50 after the company reported weaker-than-expected results for the third quarter ended September 30, 2021.

Kaiser Aluminium reported quarterly revenues of $751 million, up significantly from the prior year’s figure of $256 million. The increase in revenues was primarily driven by a 189% rise in shipments and an increase in average selling price per pound of 1%. The revenue figure, however, failed to surpass the Street’s estimate of $782.86 million.

The company reported quarterly earnings of $0.57 per share, up 46.2% year-over-year. The figure failed to surpass the consensus estimate of $1.32 per share.

In other operating metrics, the company reported adjusted EBITDA of $50 million, up 56.3% year-over-year. EBITDA margin, however, narrowed from 20.4% in the previous year to 16.5%.

Total liquidity of the company stood at $663 million with cash and cash equivalents of about $296 million and borrowing availability under the revolving credit facility of roughly $367 million.

The CEO of Kaiser Aluminium, Keith A. Harvey, said, “Demand for our general engineering end market applications remains robust due to restocking in the service center supply chain, reshoring and strength of our KaiserSelect® products. Recovery in demand for our commercial aerospace applications is progressing as anticipated and demand for our defense related applications remains strong. However, the ongoing shortage of semiconductor chips has significantly impacted North American light vehicle production, further delaying the anticipated recovery of our automotive business.” (See Kaiser Aluminium stock chart on TipRanks)

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Last month, Goldman Sachs analyst Emily Chieng initiated coverage on the stock with a Sell rating and a price target of $122, which implies upside potential of 7% from current levels.

According to the analyst, the company’s rich valuation is unjustifiable as its end market exposure lacks differentiation. The analyst added that the acquisition of the Warrick rolling mill is expected to hurt its margins and take it to below historical levels.

Consensus among analysts is a Hold based on 1 Buy, 2 Holds and 1 Sell. The average Kaiser Aluminium price target of $126 implies upside potential of 10.5% from current levels.

Kaiser Aluminium scores a 7 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market expectations. Shares have gained about 79.2% over the past year.

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