Shares of Constellium (NYSE:CSTM), which makes aluminum products for a variety of industries, were higher by a huge 22% as of 3 p.m., EDT. The gains came quickly, with the stock higher by as much as 15% within the first 30 minutes of trading. The advance briefly hit 24% or so by 11 a.m. before leveling off in the low 20% range throughout most of the day. The big news was earnings.
The headline numbers for the first quarter of 2020 were actually kind of ugly, with a 5% decline in shipments leading to a 6% decline in revenue. Earnings went from 24 million euros in the first quarter of 2019 to a loss of 31 million euros this year. As you might expect, headwinds related to COVID-19 were a major factor, with demand from key end markets, like auto manufacturing and aerospace, falling toward the end of the quarter.
Despite the obvious negatives, however, Constellium's cost cutting efforts and a generally beneficial product mix allowed it to increase adjusted EBITDA by 9% year over year. Free cash flow increased nearly 20%. In addition, the company continued its deleveraging efforts, reducing its net debt to adjusted EBITDA from 4.3 times in the first quarter of 2019 to a current 3.7 times. All in, the company's results were clearly better than investors had been expecting in the face of COVID-19 headwinds, and the stock shot dramatically higher on the news.
Although first-quarter financial results obviously pleased Wall Street, Constellium made sure to highlight that the impacts of COVID-19 will likely linger. In fact, it withdrew its full-year guidance. That's not a great sign for the future, given that the headwinds from the coronavirus only impacted a portion of the first quarter. Roughly one month into the second quarter, and only now starting to see countries reopen their economies, investors should probably go into the second quarter with low expectations.