CSTM - Embedded Expectations Analysis - 2020 05 04
Constellium SE (CSTM:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 17.7x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about leverage, their Bowling Green facility, and metal costsSpecifically, management may have concerns about their ability to reduce leverage to meet their 2022 target, overspending on capex, and slowing capital deployment as a result of operational challenges in the Automotive Structures & Industry (AS&I) segment. Moreover, management may lack confidence in their ability to generate positive EBITDA in their Bowling Green facility, sustain their Aerospace and Transportation (A&T) EBITDA growth, and maintain run rate savings. Additionally, they may lack confidence in their ability to reduce corporate and metal costs, continue execution of their aerospace contracts through 2020, and appropriately invest in competitive maintenance. Also, management may be exaggerating their ability to offset automotive business headwinds and the progress of their auto structures rampup. Finally, they may have concerns about volatility in their transport, industry, and defense (TID) business, and they may be downplaying concerns about 737 Max grounding uncertainty
Constellium N.V. designs and manufactures a range of innovative specialty rolled and extruded aluminum products, serving primarily the aerospace, packaging and automotive end-markets. Co. has a strategic footprint of manufacturing facilities located in the United States, Europe and China. Co.'s product portfolio commands higher margins as compared to less differentiated, more commoditized fabricated aluminum products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution. Co. organizes its business around three operating segments: Aerospace & Transportation, Packaging & Automotive Rolled Products, and Automotive Structures & Industry.
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