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Kaiser (KALU) Prices Notes, to Use Proceeds for Note Redemption

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Kaiser Aluminum Corporation KALU yesterday announced the pricing of $550 million worth of senior notes, which will be guaranteed by its domestic subsidiaries (both existing and future ones). It is worth mentioning here that the offering is an increase from the company’s previous offering of $500 million announced on the same day.

The notes will be offered in a private transaction. Subject to the fulfillment of closing conditions, the offering will close on May 20.

Inside the Headlines

The notes offered are due to expire in 2031 and carry a coupon rate of 4.50%.

The company prefers to use the funds raised from the notes offering for financing the redemption of its 6.500% senior notes due 2025. Also, the company may use the proceeds from the senior notes offering to fund acquisitions, capital spending and other general corporate purposes.

The offerings of senior notes might increase Kaiser’s debts, and, in turn, might inflate financial obligations and hurt profitability. However, measures related to redeeming notes will be a relief.

Kaiser’s Debt Profile

Exiting first-quarter 2021, the company’s long-term debt stood at $838.7 million, slightly above the previous quarter’s figure of $838.1 million.

In 2020, Kaiser issued $350 million worth of unsecured senior notes, with maturity in May 2025. The notes, with a coupon rate of 6.50%, were issued in two installments — $300 million in April and $50 million in May.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $2.1 billion, Kaiser currently carries a Zacks Rank #3 (Hold). Solid product offerings, strengthening end markets and buyouts are expected to aid the company in the quarters ahead. However, disruptions due to the shortage of semiconductor chips might be concerning.

In the past three months, the company’s share price has increased 28.5% compared with the industry’s growth of 13.6%.

The Zacks Consensus Estimate for its earnings is pegged at $2.27 for the second quarter of 2021 and $7.66 for 2021, representing year-over-year growth of 530.56% and 154.49%, respectively.

Stocks to Consider

Three better-ranked stocks in the industry are TriMas Corporation TRS, The Timken Company TKR and Worthington Industries, Inc. WOR. While TriMas currently sports a Zacks Rank #1 (Strong Buy), both Timken and Worthington carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates have improved for TriMas and Timken, while have been unchanged for Worthington for the current year. Further, earnings surprise in the last reported quarter was 5.26% for TriMas, 15.00% for Timken and 8.80% for Worthington.

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