Why Constellium NV's Shares Popped 20% Today

Markets Motley Fool

What happened

Continue Reading Below

Shares of aluminum maker Constellium NV (NYSE: CSTM) 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.

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

Continue Reading Below

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. 

10 stocks we like better than Constellium N.V.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Constellium N.V. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

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.