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Why Constellium NV's Shares Popped 20% Today

By Travis Hoium – Oct 26, 2017 at 2:43PM

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Rising aluminum prices are driving Constellium NV's stock higher.

What happened

Shares of aluminum maker Constellium NV (CSTM -0.74%) jumped as much as 19.7% in trading Thursday after reporting third-quarter results that topped expectations. At 1:15 p.m. EDT shares were holding a 10.8% gain for the day.

So what

Shipments fell 1% versus a year ago in Q3 2017 to 374,000 metric tons, but revenue was up 7% to 1.3 billion euros. Net income was up 40% to 21 million euros. Earnings on a per-share basis were 0.20 euros or $0.24, which is what analysts were comparing estimates to and their estimate was only for $0.18.

Molten aluminum being poured into a mold.

Image source: Getty Images.

Packaging and automotive products led the charge with a 14% increase in revenue versus a year ago. Management was even confident enough to update adjusted EBITDA growth guidance for 2017 to 13% from a previous guidance of high single-digit growth.

Now what

Higher prices for aluminum and lower operating costs are really driving Constellium's recovery in 2017. The cost side is something management has been focusing on in a program called "Project 2019," which has already accounted for 15 million euros of run rate cost savings.

While the company may not be able to do much to control aluminum prices long term, it will ride the wave of higher revenue when it comes. Fundamentally, I don't think the investment thesis of the company has changed because costs are coming down about as expected. But investors are buying into higher earnings from rising aluminum prices right now and that's what may drive shares higher in the near future. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Constellium N.V. Stock Quote
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