Last Update 29 Nov 25
CENX: Power Agreement Extension and 50% Tariff Support Will Drive Future Gains
Analysts have reaffirmed Century Aluminum's fair value target at $36.00, citing improving profit margins and favorable aluminum market conditions as key factors that support their outlook.
Analyst Commentary
Analyst opinions regarding Century Aluminum's prospects reflect a careful balance of optimism about the company’s positioning in the current market environment and caution around certain industry trends.
Bullish Takeaways- Bullish analysts highlight recent upward revisions in price targets, indicating strong confidence in Century Aluminum's ability to capitalize on favorable aluminum market dynamics.
- Improvements in global aluminum prices, particularly driven by sustained demand from China, have outpaced prior expectations and are seen as supporting continued revenue growth.
- The company is viewed as a direct beneficiary of ongoing tariffs on aluminum imports, which help maintain a competitive pricing environment and support domestic profitability.
- Updates to forward-looking curves for aluminum strengthen the argument that Century Aluminum could outperform valuation benchmarks if current conditions persist.
- Bearish analysts note that despite international strength, business momentum in the US and EU has been weak. This divergence could challenge Century Aluminum’s global performance and execution.
- There is caution that recent support from tariffs may not be permanent, which could expose margins to future policy changes or increased competition from imports.
- Valuation upgrades depend heavily on continued robust demand and elevated pricing, with any downturn in global markets likely to pressure future expectations.
What's in the News
- Century Aluminum signed a power agreement extension with Santee Cooper to secure stable electricity for its Mt. Holly smelter through 2031. This agreement paves the way to restart idle capacity and create over 100 new jobs. Full production is targeted by early summer 2026.
- President Trump reversed a Biden-era rule on copper smelter emissions and granted a two-year exemption for compliance to affected companies, including those in the aluminum sector such as Century Aluminum. (Reuters)
- An electrical equipment failure at Century Aluminum's Grundartangi plant led to the announcement of a temporary reduction of production capacity to one-third. There is no current estimate for full restoration.
Valuation Changes
- Fair Value Target remains unchanged at $36.00 per share.
- Discount Rate has risen slightly to 8.57% from 8.53%.
- Revenue Growth expectation is steady at 7.53% year-over-year.
- Net Profit Margin has increased to 19.22% from the previous 17.92%.
- Future P/E ratio has fallen slightly to 7.33x from 7.69x.
Key Takeaways
- Expansion of U.S. production and operational efficiency improvements position the company to benefit from rising demand and favorable market conditions.
- Government incentives and strong end-market trends support revenue growth, margin expansion, and enhanced financial flexibility for future initiatives.
- Heavy reliance on favorable market conditions, government support, and stable input costs exposes the company to significant operational, regulatory, and competitive risks that threaten profitability.
Catalysts
About Century Aluminum- Produces and sells standard-grade and value-added primary aluminum products in the United States and Iceland.
- The expansion and restart of Mt. Holly, along with progress on a new U.S. smelter, positions Century Aluminum to meaningfully increase U.S. primary aluminum production, capturing rising domestic demand driven by reshoring of supply chains and incentivized by government tariffs and trade protections-supporting future revenue growth and improved fixed cost absorption, thus enhancing net margins.
- Expected sustained tightness in global primary aluminum supply (with China near capacity caps and minimal new ex-China projects) should maintain favorable pricing levels and strong Midwest premiums, especially as U.S. demand rebounds from infrastructure and electrification trends, providing a tailwind for top-line growth and improved EBITDA.
- The company's investments in operational efficiency-evident in safety initiatives and planned capital improvements, such as the Jamalco steam turbine upgrade-support further margin expansion by lowering energy and operating costs, translating into stronger future earnings.
- Continued momentum in end-market demand (especially value-added products like billets for transportation electrification and the growing use of aluminum in clean energy and sustainable packaging) is driving higher premiums and increased shipment volumes, directly benefiting revenue visibility and margin expansion.
- Receipt of substantial U.S. manufacturing tax credits (45X credits) tied to domestic production volumes-expected to grow with the Mt. Holly restart and potential new smelter-should significantly enhance future free cash flow and net income, providing financial flexibility for additional growth initiatives.
Century Aluminum Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Century Aluminum's revenue will grow by 7.6% annually over the next 3 years.
- Analysts assume that profit margins will increase from 4.6% today to 15.8% in 3 years time.
- Analysts expect earnings to reach $479.3 million (and earnings per share of $3.88) by about September 2028, up from $111.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.7x on those 2028 earnings, down from 18.2x today. This future PE is lower than the current PE for the US Metals and Mining industry at 22.5x.
- Analysts expect the number of shares outstanding to grow by 0.58% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.9%, as per the Simply Wall St company report.
Century Aluminum Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Century's financial performance and positive outlook are currently heavily dependent on high U.S. Midwest aluminum premiums and the continued effectiveness of Section 232 tariffs; a future policy change-such as removal or lowering of tariffs-would likely reduce domestic premiums and demand, pressuring both revenues and net margins.
- The company's ambitious investment in expanding production capacity at Mt. Holly and planning a new smelter exposes it to significant execution risk, including potential delays or cost overruns, which could materially increase capital expenditures and reduce free cash flow and overall profitability.
- Century remains highly exposed to volatility in raw material and energy costs (like alumina, coke, power), with periods of elevated or unpredictable prices capable of sharply increasing operating expenses and compressing EBITDA margins-particularly given the energy-intensive nature of its smelting operations.
- Dependence on government incentives and industrial power contracts (e.g., with Santee Cooper at Mt. Holly) introduces uncertainty; changes to these incentives, power availability/cost, or regulatory frameworks could negatively affect long-term cost structures and erode net margins.
- Weakening premiums and sluggish demand in the European market, ongoing currency headwinds, and continued global competition from low-cost producers (especially from China and the Middle East) create long-term risks of margin compression and lower revenue growth abroad, making Century's global earnings less predictable.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $27.0 for Century Aluminum based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.0 billion, earnings will come to $479.3 million, and it would be trading on a PE ratio of 6.7x, assuming you use a discount rate of 7.9%.
- Given the current share price of $21.74, the analyst price target of $27.0 is 19.5% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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