What happened
Shares of Constellium (CSTM 1.42%), which makes value-added aluminum products, fell as much as 15% on Wednesday, drifting lower throughout most of the trading day. The big news was the company's third-quarter 2022 earnings release, which was a bit of a mixed bag. It seems investors chose to focus on the negatives and not the positives.
So what
On the top line, Constellium reported sales were up 27% from the year-ago quarter. Net income increased nearly 33% from the prior year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 12% year over year, and cash from operations more than doubled.
Rising prices more than offset a 2% year-over-year decline in metric tons sold. So far, so good, but it gets even better, given that the company also beat Wall Street expectations on the top and bottom lines. Normally investors would see such news as a reason to celebrate.
The wrench in the works here was most likely the company's adjusted EBITDA outlook for the year, which remained unchanged. Except that management warned that it would likely fall toward the low end, given the current business trends it is seeing.
The adjusted EBITDA trends aren't as positive as they were just a couple of quarters ago. For starters, adjusted EBITDA declined sequentially between the second and third quarters after a solid string of increases. And given the adjusted EBITDA through the first nine months of 2022, the low end of full-year guidance would suggest that the fourth quarter could see a sequential adjusted EBITDA decline of as much as 10%. That's another sequential drop and would leave adjusted EBITDA only about flat with the year-earlier period after a string of year-over-year adjusted EBITDA growth.
Now what
Basically, it looks like Constellium's business isn't performing quite as strongly as it was before. That's not exactly shocking, given the weakening global economy. Still, given the stock action today, Wall Street appears to have been hoping for something more positive.
