Can Century Aluminum (CENX) Surprise This Earnings Season? - Analyst Blog

Century Aluminum Co. ( CENX ) is scheduled to report fourth-quarter 2014 results after the closing bell on Feb 24, 2015. In the last quarter, this aluminum company had delivered a positive earnings surprise of 1.96%. Let's see how things are shaping up for this announcement.

Factors to Consider

Century Aluminum's net sales in the third quarter of 2014 were up 9% from the second quarter reflecting continuous improvements in market conditions as well as growing volumes. Global shipments also increased 1% sequentially in the reported quarter.

Century Aluminum, in late 2014, completed the acquisition of the Mt. Holly aluminum smelter. The company is quite optimistic about this plant as it focuses on employee safety and has a quality team of employees and management, with a good track record of production efficiencies at reduced costs. However, the cost of electric power in the plant remains a big concern.

Century Aluminum also plans to build a second oven for manufacturing quality products at a lower conversion cost. The project cost is estimated to be $15 million. These infrastructural investments by the company will help increase production. Additional output is expected to commence in late 2015.

Value-added production has come on-stream at both Sebree and Grundartangi, and commercial production is scheduled at both plants in 2015. Century Aluminum is looking forward to achieving production of 50,000 tons in each of the product families at both plants this year.

The company forecasts global consumption of aluminum to increase in North America in 2015 on the back of strong demand in automotive and aerospace markets. On the other hand, consumption rates are likely to decline in the mid-to-high single digit (in the range of 6-8%) in China owing to government programs. However, supply in China is anticipated to rise at a low double-digit clip in 2015 (10% to 12% range).

Earnings Whispers

Our proven model shows that Century Aluminum is likely to beat earnings this season because it has the right combination of the two key components.

Zacks ESP: Century Aluminum has an Earnings ESP of +7.58% - the difference between the Most Accurate estimate of 71 cents and the Zacks Consensus Estimate of 66 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Century Aluminum currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Century Aluminum's Zacks Rank #3 and positive ESP make us reasonably confident of an earnings beat.

Stocks that Warrant a Look

Here are some other companies in the basic materials sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Daqo New Energy Corp. ( DQ ) has an Earnings ESP of +41.18% and a Zacks Rank #2 (Buy).

Rio Alto Mining Limited ( RIOM ) has an Earnings ESP of +20.00% and a Zacks Rank #3.

U.S. Silica Holdings, Inc. ( SLCA ) has an Earnings ESP of +8.45% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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