Aluminum-Lithium Margin Lifts Constellium's Performance: Analyst Anticipates Future Shareholder Returns

Benchmark analyst Josh Sullivan reiterated a Buy rating on Constellium SE CSTM, raising the price target to $24 from $19.

CSTM recently reported Q2 results, raising FY23 EBITDA guidance due to robust aerospace sales. 

Demand for high-value aerospace plates and other products is driving significant EBITDA per ton in Aerospace & Transportation as aerospace OEMs raise near-term production rates while looking to restock for long-term order flow, the analyst notes.

Further, Sullivan notes that a very high margin per ton of aluminum-lithium used on the popular A350 and A220 Airbus platforms is likely providing a tailwind. 

However, the aluminum packaging market is still transitioning out of a destocking cycle which could take a couple more quarters to complete, the analyst cautions.

Overall, the analyst thinks that aerospace demand is well ahead of expectations and is more than compensating for near-term issues in secondary markets.

Net leverage is now 2.7x, down 0.3x y/y. With FCF improving and CSTM moving towards the 2.5x net leverage target, the company is likely to start exploring shareholder returns, Sullivan adds.

Price Action: CSTM shares are trading higher by 1.790% to $19.08 on the last check Thursday.