NEW YORK (TheStreet) -- Aluminum for delivery within three months has lost 18% during the last two months on the London Metal Exchange. Subsequently, aluminum stocks, including Alcoa (AA), Kaiser Aluminum (KALU), Century Aluminum (CENX), Alumina (AWC), and Aluminum Corp of China (ACH) have declined 21%, 11%, 34%, 13% and 23%, respectively.
Based on fundamental reasons, Kaiser Aluminum and Century Aluminum seem attractive buys. Kaiser is trading at a forward price-to-earnings ratio of 23.77, while Century Aluminum is trading at a P/E of 9.57.
During the first quarter, the average price of aluminum stood at about $2,200 per ton. Average aluminum prices for the second quarter to date stand at $2,144 per ton.
Assuming Friday's closing price as an average price for the rest of the quarter, aluminum prices will end the second quarter at an average price of $2,107 per ton, implying a quarter over quarter drop of 4%.Moreover, if we look at the sales estimates of these stocks given by analysts there have been no major revisions made during the last two months, suggesting that this decline in aluminum prices was expected and has been factored in the revenue guidance. Although Kaiser has only declined 11%, the selloff in Century Aluminum seems overdone. Kaiser's current revenue estimates of $280 million for the second quarter reflect a negligible drop in sales volume. For the third and fourth quarter, going by volume and aluminum price estimates, revenue is estimated to be $292 million and $295 million, respectively. According to Bloomberg estimates, revenue for the second quarter was revised upwards from $268 million in April to $280 million as of June 7, implying a 4.5% increase. This is despite a 21% drop in aluminum prices during the same period. On June 1, UBS rated the stock a buy with price target of $44, representing a 13% upside over current levels. Century Aluminum, on the other hand, has witnessed a 38% drop in its stock price. According to Bloomberg estimates, revenue for the second quarter was revised downwards from $308 million in mid-April to $299 million as of May 25, implying a 3% decrease. For the third and fourth quarter, going by volume estimates, revenue is estimated to be $295 million and $302 million, respectively
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV