CENX: Supportive Trade Tariffs Will Drive Future Pricing Power And Upside

Analysts have raised their price target on Century Aluminum to $37 from $36, citing stronger than expected aluminum pricing driven by resilient China demand and the company’s leverage to supportive U.S. trade tariffs.

Analyst Commentary

Bullish Takeaways

• Bullish analysts highlight that recent aluminum prices have outpaced prior forecasts, supporting upward revisions to revenue and EBITDA expectations and justifying the higher price target.
• Resilient demand from China is seen as underpinning a more durable pricing backdrop, which could drive stronger volume and margin execution than previously modeled.
• The company’s meaningful leverage to 50% Section 232 tariffs on aluminum imports is viewed as a structural competitive advantage that supports premium valuation versus global peers.
• Initiation at an Overweight rating, coupled with a $37 price objective, signals confidence that earnings growth and cash flow generation can outpace the broader mining group over the medium term.

Bearish Takeaways

• Bearish analysts caution that weakness in U.S. and EU industrial activity may limit demand growth outside China, creating execution risk if domestic and European end markets remain soft.
• Reliance on favorable trade policy is viewed as a potential overhang, as any shift in Section 232 tariffs could compress margins and challenge the current valuation premium.
• Elevated expectations for aluminum pricing leave less room for error, raising the risk of multiple compression if prices normalize faster than anticipated.
• Concentration in a cyclical commodity sector leaves earnings highly sensitive to macro downturns, which could delay realization of the projected upside to the $37 target.

What's in the News

• President Trump reversed a Biden-era rule that had tightened copper smelter emissions limits, granting a two year compliance exemption. This move could ease regulatory pressure on metals producers broadly, including Century Aluminum (Reuters).
• Century Aluminum reported a significant operational disruption at its Grundartangi plant in Iceland after an electrical equipment failure, temporarily cutting production capacity to about one third and impacting key logistics partner Eimskip's transport volumes (company announcement).
• The company extended its power agreement with Santee Cooper to secure long term electricity supply for the Mt. Holly smelter through 2031. The deal underpins a planned $50 million investment to restart idle capacity, add 50,000 metric tons of output, and create over 100 new jobs by 2026 (company announcement).
• Century Aluminum disclosed that during the latest quarter it executed no additional share repurchases, while confirming completion of its long running buyback program with a total of about 7.2 million shares repurchased for $86.27 million since its 2011 authorization (company filing).

Valuation Changes

• Fair Value: Unchanged at $36.00 per share, reflecting stable long term intrinsic value assumptions.
• Discount Rate: Risen slightly from 8.57% to 8.62%, implying a modestly higher required return and risk premium.
• Revenue Growth: Effectively unchanged, ticking up marginally from 7.53% to 7.53%, indicating steady top line expectations.
• Net Profit Margin: Essentially flat, moving minimally from 19.22% to 19.22%, suggesting no meaningful change in margin outlook.
• Future P/E: Edged up slightly from 7.33x to 7.34x, signaling a small increase in the implied valuation multiple for forward earnings.