The growing concerns regarding declining demand due to China’s strict COVID-19 lockdowns caused a selloff in aluminum stocks. Last week, aluminum prices plunged to four-month lows amid concerns over slowing manufacturing activity, particularly in China. Manufacturing activity in the United States and the eurozone also slowed down.
However, with the broad use of aluminum in various industries, including construction, transportation, packaging, foundry, and electronics, fundamentally sound aluminum companies have bright growth prospects over the long term and are well-positioned to rebound quickly.
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Therefore, we think it would be wise to invest in quality aluminum stocks Aluminum Corporation China Limited (ACH) and Constellium SE (CSTM) on their dips.
Aluminum Corporation China Limited (ACH)
Headquartered in Beijing, the People’s Republic of China, ACH manufactures and sells alumina, primary aluminum, aluminum alloys, and carbon products. The company operates through five business segments: Alumina; Primary Aluminum; Trading; Energy; and Corporate and Other Operating. It mines for bauxite coal deposits, procure alumina, and other raw materials, and trades in alumina, primary aluminum, aluminum fabrication products, ferrous metal products, and coal products.
For its fiscal year 2021, which ended Dec. 31, 2021, ACH's revenue grew 45% year-over-year to $43.33 billion, while its gross profit improved 115% from the last year to $4.16 billion. Its operating profit increased 121.4% year-over-year to $2.10 billion, and its profit before income tax rose 364.9% year-over-year to $1.60 billion. The company’s profit for the year increased 387.1% from the prior year to $1.22 billion.
Analysts expect ACH's revenue for its fiscal 2022 fourth quarter, ending Dec. 31, 2022, to come in at $12.25 billion, representing a 4.2% rise year-over-year. The company has an impressive revenue history; it has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of ACH have decreased 31.3% in price over the past month and 30.5% over the past six months and closed yesterday's trading session at $9.54.
ACH's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
ACH has a grade of A for Value and a B grade for Growth. Within the B-rated Aluminum industry, it is ranked #1 of 6 stocks.
To see additional POWR Ratings (Momentum, Sentiment, Stability, and Quality) for ACH, click here.
Constellium SE (CSTM)
CSTM designs, manufactures, and sells rolled and extruded aluminum products for the packaging, automotive, and aerospace industries and is headquartered in Schiphol-Rijk, the Netherlands. The company operates through three segments: Packaging and Automotive Rolled Products; Aerospace Transportation; and Automotive Structures and Industry. It also provides downstream technology and services.
Last November, CSTM restarted its upgraded 144-inch cold rolling mill at its facility in Ravenswood, West Virginia. This restart marks the completion of the project's first phase to upgrade its mechanical, electrical, hydraulic, and process control systems. “This achievement was made possible by our partnership with the IBAS program and the Department of Defense. It will enable us to produce higher performance and higher quality plates in the volumes needed by the DoD over the next decade,” stated the CEO of Constellium Rolled Products Ravenswood.
CSTM's revenue increased 47.6% year-over-year to €1.98 billion ($2.09 billion), while its gross profit rose 52.8% year-over-year to €217 million ($228.65 million) in the fiscal 2022 first quarter, ended March 31, 2022. Its income from operations improved 117.5% year-over-year to €248 million ($261.31 million), and its adjusted EBITDA grew 38% from the prior-year period to €167 million ($175.96 million). The company’s net income and earnings per share attributable to equity holders of CSTM came in at €179 million ($188.61 million) and €1.20, respectively, registering an increase of 272.9% and 275% year-over-year.
The $2.22 billion consensus revenue estimate for its fiscal 2022 second quarter, ending June 30, 2022, represents 23.7% growth from the same value in 2021. It is no surprise that CSTM has surpassed the consensus revenue estimates in each of the trailing four quarters. The $0.30 consensus EPS estimate for the fourth quarter, ending Dec. 31, 2022, indicates a 353.2% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 9.2% in price over the past month and closed yesterday’s trading session at $15.58.
CSTM's POWR Ratings reflect a promising outlook. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
CSTM has a grade of B for Value, Momentum, and Sentiment. Within the Aluminum industry, it is ranked #2 of 6 stocks.
To see additional POWR Ratings (Stability, Quality, and Growth) for CSTM, click here.
ACH shares were trading at $9.14 per share on Thursday afternoon, down $0.40 (-4.19%). Year-to-date, ACH has declined -33.43%, versus a -17.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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