Constellium: As Manufacturer Deleverages, Cowen Finds More Positives

With Constellium NV CSTM's results for this year exceeding expectations and "helping to materially reduce leverage," Cowen is now shifting the focus to other positives at the aluminum company. 

The Analyst

Cowen analyst Novid Rassouli upgraded shares of Constellium from Market Perform to Outperform and upped the price target from $11 to $13.

The Thesis

There's evidence that Constellium's new management team, which took over in the middle of 2016, has been steadily regaining investor confidence, Rassouli said in a Monday note. (See Rassouli's track record here.) 

The better-than-expected year-to-date EBITDA has helped the company de-lever from 5.5 times at the beginning of 2017 to 4.8 times at the end of the third quarter, Rassouli said. 

The analyst said he expects the company to close the year at a leverage of 4.3 times, thanks in part to an equity offering in late October.

Constellium is exposed to two attractive growth end markets, namely automotive and aerospace, according to Cowen. Once major investments are ramped, potentially in 2020, the firm said EBITDA could reach 562 million euros, ahead of its 424 million-euro estimate.

Notwithstanding strong year-to-date gains, the valuation of Constellium is still attractive, Rassouli said. 

The Price Action

Constellium stock is up about 75 percent year-to-date.

The stock was up 0.49 percent at $10.25 at the close Monday. 

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