Kaiser Aluminum (KALU) AI Stock Analysis

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Kaiser Aluminum

(NASDAQ:KALU)

56Neutral

Kaiser Aluminum's stock is currently facing headwinds from declining revenues and cash flow issues as highlighted by its financial performance. Technical analysis suggests a bearish trend, with the stock underperforming and exhibiting volatility. Despite these challenges, the company's valuation remains reasonable, supported by an attractive dividend yield. The positive guidance from the earnings call indicates potential improvements in operational and financial metrics in the future. Investors should weigh the potential for recovery against current financial constraints.

Kaiser Aluminum (KALU) vs. S&P 500 (SPY)

Market Cap

$882.63M

Dividend Yield5.89%

Average Volume (3M)165.34K

Price to Earnings (P/E)19.1

Beta (1Y)1.68

Revenue Growth-2.04%

EPS Growth-1.36%

CountryUS

Employees4,000

SectorBasic Materials

Sector Strength60

IndustryAluminum

Share Statistics

EPS (TTM)2.87

Shares Outstanding16,100,473

10 Day Avg. Volume250,334

30 Day Avg. Volume165,335

Financial Highlights & Ratios

PEG Ratio0.10

Price to Book (P/B)N/A

Price to Sales (P/S)0.35

Price to Cash Flow (P/CF)6.20

P/FCF Ratio4.80

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$80.00

Price Target Upside44.14% Upside

Rating ConsensusHold

Number of Analyst Covering1

Kaiser Aluminum Business Overview & Revenue Model

Company DescriptionKaiser Aluminum Corporation (NASDAQ: KALU) is a leading producer of semi-fabricated specialty aluminum products, primarily serving the aerospace, automotive, and industrial sectors. Established over 70 years ago, the company operates a network of manufacturing facilities in North America, providing high-quality aluminum sheet, plate, extrusions, and other value-added products. Kaiser Aluminum's expertise in technology and engineering allows it to deliver customized solutions that meet the specific needs of its diverse clientele.

How the Company Makes MoneyKaiser Aluminum makes money by producing and selling semi-fabricated aluminum products to various industries, including aerospace, automotive, and general industrial markets. The company's revenue streams are largely derived from the sale of aluminum sheet and plate, extruded products, and engineered components. A significant portion of its earnings comes from long-term contracts with major customers in the aerospace and automotive sectors, where high performance and precision are critical. Additionally, the company benefits from strategic partnerships and its ability to leverage advanced manufacturing technologies to produce high-margin, value-added products that meet specific customer requirements.

Kaiser Aluminum Financial Statement Overview

Summary

Kaiser Aluminum faces challenges with declining revenue and cash flow issues. Despite maintaining a strong gross profit and stable net profit margin, the company's operational efficiency and cash generation are concerns. The balance sheet shows a significant reduction in leverage, boosting financial stability, but low ROE suggests limited profitability from equity. Improvements are needed in cash flows and operational margins.

Income Statement

Positive

Kaiser Aluminum has shown a decline in total revenue over the past year, with a decrease from $3.087 billion in 2023 to $3.024 billion in 2024, representing a negative growth rate. However, the company maintains a strong gross profit with a 100% gross profit margin due to reporting total revenue as gross profit, though this is likely an anomaly in reporting. The net profit margin remains stable around 1.54% in 2024, down slightly from 1.53% in 2023, indicating consistent profitability despite revenue challenges. The EBIT and EBITDA margins are relatively low, at 2.90% and 3.40% respectively in 2024, highlighting constrained operational efficiency.

Balance Sheet

Neutral

Kaiser Aluminum shows a moderate equity ratio of 28.85%, down from 28.76% in 2023, suggesting a balanced capital structure. However, the debt-to-equity ratio improved significantly from 1.65 in 2023 to 0.04 in 2024, reflecting reduced leverage due to a drop in total debt. Return on Equity (ROE) remains modest at 7.01% for 2024, indicating efficient use of equity to generate profits. Overall, the company's financial stability is supported by solid equity, but the low ROE and high previous leverage highlight potential risks in financial sustainability.

Cash Flow

Negative

The company's cash flow from operations fell to zero in 2024 from $211.9 million in 2023, indicating potential liquidity issues. The free cash flow also dropped to zero, a significant decline from $68.7 million in 2023, highlighting challenges in generating cash surplus. The operating cash flow to net income ratio and free cash flow to net income ratio both fell sharply, illustrating difficulties in converting income into cash. Despite these issues, the company managed to maintain stable financing activities with reduced financing cash outflows.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
3.02B	3.09B	3.43B	2.62B	1.17B
	Gross Profit
332.90M	332.10M	140.80M	182.40M	179.20M
	EBIT
87.70M	95.80M	-73.80M	-66.80M	35.00M
	EBITDA
223.60M	211.80M	131.50M	151.00M	136.60M
	Net Income Common Stockholders
46.80M	47.20M	-29.60M	-18.50M	28.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
18.40M	82.40M	57.40M	303.20M	780.30M
	Total Assets
2.31B	2.27B	2.29B	2.42B	1.86B
	Total Debt
25.20M	1.08B	1.07B	1.08B	863.70M
	Net Debt
6.80M	996.70M	1.02B	773.90M	83.40M
	Total Liabilities
1.65B	1.62B	1.66B	1.73B	1.13B
	Stockholders Equity
668.00M	652.20M	631.20M	692.50M	732.40M
Cash Flow		Free Cash Flow
-13.70M	68.70M	-205.60M	21.40M	155.00M
	Operating Cash Flow
167.10M	211.90M	-63.10M	79.40M	206.90M
	Investing Cash Flow
-174.60M	-128.20M	-125.80M	-665.80M	26.90M
	Financing Cash Flow
-55.30M	-54.30M	-56.80M	109.10M	281.90M

Kaiser Aluminum Technical Analysis

Technical Analysis Sentiment

Negative

Last Price55.50

Price Trends

50DMA

66.56

Negative

100DMA

70.51

Negative

200DMA

72.70

Negative

Market Momentum

MACD

-2.21

Positive

RSI

27.49

Positive

STOCH

8.50

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KALU, the sentiment is Negative. The current price of 55.5 is below the 20-day moving average (MA) of 61.03, below the 50-day MA of 66.56, and below the 200-day MA of 72.70, indicating a bearish trend. The MACD of -2.21 indicates Positive momentum. The RSI at 27.49 is Positive, neither overbought nor oversold. The STOCH value of 8.50 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KALU.

Kaiser Aluminum Risk Analysis

Kaiser Aluminum disclosed 39 risk factors in its most recent earnings report. Kaiser Aluminum reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Kaiser Aluminum Peers Comparison

Overall Rating

UnderperformOutperform

Sector (47)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CENX	66 Neutral	$1.35B	4.85	64.15%	―	1.60%	―
AA	60 Neutral	$6.69B	92.23	1.28%	1.68%	14.80%	96.53%
KALU	56 Neutral	$882.63M	19.12	7.09%	5.89%	-2.04%	-1.36%
CSTM	51 Neutral	$1.14B	25.91	5.86%	―	-6.31%	-65.09%
NEXA	51 Neutral	$781.39M	―	-20.22%	―	6.28%	29.57%
RDUS	47 Neutral	$821.24M	―	-41.03%	2.58%	-4.98%	-910.57%
Sector *	47 Neutral	$2.43B	-3.06	-22.76%	3.59%	4.02%	-29.07%

* Basic Materials Sector Average

Performance Comparison

KALU

Kaiser Aluminum

55.50

-29.93

-35.03%

Alcoa

24.75

-11.41

-31.55%

CENX

Century Aluminum

15.60

-2.15

-12.11%

RDUS

Schnitzer Steel Industries

29.07

12.27

73.04%

CSTM

Constellium

8.06

-12.95

-61.64%

NEXA

Nexa Resources SA

5.99

-1.13

-15.87%

Kaiser Aluminum Earnings Call Summary

Earnings Call Date: Feb 19, 2025 | % Change Since: -22.23% | Next Earnings Date: Apr 23, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with both positive and negative aspects. Highlights such as EBITDA margin expansion, strong performance in General Engineering, and strategic investments in the Packaging segment indicate positive growth prospects. However, the call also highlighted challenges such as declines in Aero and High Strength revenue, depreciation-related operating income decline, and an increased tax rate.

Highlights

EBITDA Margin Expansion

EBITDA margin expanded by approximately 60 basis points year-over-year and by 460 basis points since 2022. The company expects to continue progress towards achieving EBITDA margin goals in the mid-20% range.

Strong Performance in General Engineering

General Engineering conversion revenue for 2024 was $313 million, up 3% year-over-year, with a 6% increase in shipments. Pricing remained stable despite uneven demand and import pressures.

Automotive Segment Growth

Automotive conversion revenue was $120 million, up 3% over 2023, primarily due to an improved product mix of higher value-added products.

Anticipated Free Cash Flow and Improved Liquidity

The company expects greater than $100 million of free cash flow for the year 2025, driven by lower capital expenditures and reduced working capital demands. Total liquidity was strong at $572 million as of December 2024.

Packaging Segment Investment

Significant investments in Warwick facility expected to increase conversion revenue by 20% to 25% in 2025, with shipments up 3% to 5% year-over-year. The investment is expected to yield 300 basis points to 400 basis points of EBITDA margin expansion at full run rate.

Lowlights

Decline in Aero and High Strength Revenue

Aero and High Strength conversion revenue totaled $530 million, down $4 million or approximately 1%, reflecting a 4% decline in shipments over last year.

Challenges in Packaging Segment

Packaging conversion revenue totaled $490 million, down $13 million or approximately 3%, reflecting a 3% decline in shipments. The company faced challenges in shifting product availability towards a more coated-centric mix.

Increased Depreciation and Operating Income Decline

2024 operating income included a $9 million increase in depreciation expense. Adjusted operating income was $100 million, down $1 million from 2023.

Higher Tax Rate

The effective tax rate for 2024 was 26%, up from 16% in 2023, due to an increase in valuation allowance on certain state operating losses and credits.

Increased Net Debt Leverage Ratio

As of year-end, the net debt leverage ratio was 4.8 times, against a target leverage ratio of 2 times to 2.5 times.

Company Guidance

During the Kaiser Aluminum Corporation's fourth-quarter 2024 earnings call, the company provided guidance for 2025, emphasizing continued growth and strategic investments across its operations. Kaiser Aluminum expects consolidated conversion revenue to rise by 5% to 10% and anticipates EBITDA margin to improve by 50 to 100 basis points in 2025. The company forecasts a significant portion of EBITDA, about 60%, to be generated in the second half of the year, driven by increased demand and the ramp-up of strategic investments, including the Phase 7 expansion at Trentwood and the new roll coat line at Warwick. Despite challenges in the packaging market, the company projects a 3% to 5% increase in shipments and a 20% to 25% rise in conversion revenue for the segment. Additionally, Kaiser Aluminum plans to reduce capital expenditures to approximately $125 million in 2025, following the completion of major projects, and aims to generate over $100 million in free cash flow. With an effective tax rate projected to be in the low-to-mid-20% range and cash taxes estimated between $5 million and $7 million, the company remains committed to strengthening its balance sheet and enhancing shareholder value.

Kaiser Aluminum Corporate Events

Executive/Board Changes

Kaiser Aluminum Announces Leadership Changes for 2025

Positive

Jan 6, 2025

Kaiser Aluminum Corporation announced the retirement of Jack A. Hockema as Executive Chair, effective January 1, 2025, with CEO Keith A. Harvey appointed as Chairman of the Board. Kimberly T. Glas has been appointed as a new director, filling the vacancy left by Mr. Hockema. Ms. Glas brings over 20 years of experience in government policy development and advocacy, particularly with labor unions, and will serve on the Board’s audit and sustainability committees. This leadership transition is expected to continue the company’s legacy of operational excellence and enhance stakeholder value.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.