Kaiser Aluminum Corporation KALU yesterday announced the pricing of $500 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 company announced the offering on Nov 18.
The notes will be offered in a private transaction. Subject to the fulfillment of closing conditions, the offering will close on Nov 26, 2019.
Inside the Headlines
The notes offered are due to expire in 2028 and carry a coupon rate of 4.625%.
Funds raised from the notes offering will be used by Kaiser for financing the redemption of 5.875% senior notes due 2024 — including principal amount of $375 million and redemption premium of $16.5 million. Also, the company may use the proceeds from the senior notes offering to fund share buybacks, capital spending and acquisitions.
We believe that offerings of senior notes might increase Kaiser’s debts, and in turn might inflate financial obligations and hurt profitability. However, measures relating to redeeming notes will be a relief.
Kaiser’s Debt Profile
It is worth mentioning here that the company's long-term debt at the end of the third quarter of 2019 stood at $371.1 million, higher than $370.4 million at the end of 2018.
In October 2019, Kaiser entered a $375-million senior secured revolving credit facility, replacing the previous facility, maturing in December 2020. The new credit facility is valid for five years.
Zacks Rank, Price Performance and Estimate Trend
With a market capitalization of $1.8 billion, Kaiser currently carries a Zacks Rank #3 (Hold). In the past 60 days, the Zacks Consensus Estimate for its earnings has declined 5.4% to $6.81 for 2019 and 0.9% to $7.75 for 2020.
Kaiser Aluminum Corporation Price and Consensus
Kaiser Aluminum Corporation price-consensus-chart | Kaiser Aluminum Corporation Quote
The company’s share price has increased 19.4% in the past three months compared with the industry’s growth of 16.3%.
Stocks to Consider
Three better-ranked stocks in the Zacks Industrial Products sector are Northwest Pipe Company NWPX, CIRCOR International, Inc CIR and Dover Corporation DOV. While Northwest Pipe currently sports a Zacks Rank #1 (Strong Buy), both CIRCOR and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates have improved for these stocks for the current year. Further, average positive earnings surprise in the last four quarters was 20.14% for Northwest Pipe, 11.92% for CIRCOR and 6.70% for Dover.
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