CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We decrease our 12-month target by $21 to $14, as we value AA at an EV/EBITDA of 5.1x our 2024 EBITDA estimate, which is in line with AA’s three-year average forward EV/EBITDA. We decrease our 2023 EPS estimate by $1.30 to a loss per share of $2.33 and shift 2024’s from an EPS of $2.91 to a loss per share of $0.57. AA posted a Q3 adjusted loss per share of $1.14 vs. a loss per share of $0.33, $0.07 better than consensus, with a top-line beat of 0.7%. The biggest factors leading to our bearish outlook are 1) consensus estimates that are too optimistic for 2024, in our view; 2) AA is currently hemorrhaging cash, with negative free cash flow of $76M during Q3 and negative $503M during the trailing 12 months; 3) continued delays in ramping up its Alumar smelter (now 65% ramped); 4) challenges with securing long-term competitive power agreements; and 5) the announcement yesterday that AA will not see improved bauxite grades in Western Australia until 2027 at the earliest, compared to prior guidance of mid-2024.