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Hello all. Hope you all had a nice weekend. We are going to be getting into a pretty solid Overnight Trade today that I think has some really solid potential to make a big move. Let’s get into the trade…
Overnight Trade of the Day: Centex Aluminum Co. (CENX)
Analysis: Centex will be reporting earnings this evening in after hours. The company is expected to report earnings of 0.19 EPS. The company is one of America’s largest aluminum production companies. The company offers primary aluminum, molten aluminum, and other aluminum products. I like this company for a variety of reasons. The first main reason is that it is well positioned to have a huge pop on anything positive. The company is in the shadows of aluminum giant Alcoa Inc. (AA) for sure. When Alcoa falls, Centex falls. Since Alcoa’s less than sexy earnings on April 12, the value of CENX has declined significantly – over 10% before today. Moving into earnings today, the stock dropped another 6.25%, which is all because of Alcoa.
Yet, if we look at Century Aluminum a little more carefully, this company actually moved into profitability last quarter and is predicted to make even more money in this Q1 of 2010. This situation is very beneficial because one year ago the company lost 1.39 EPS. It was a huge miss to the downside. That is playing into the stock dipping today. The thing about the AA earnings, though, was that they did beat estimates, and if it had been a normal stock that does not set the entire tone for earnings season and is so scrutinized, the earnings would have been interpreted differently…perhaps the way Centex will be. The company is predicted to make a huge jump year-over-year and quarter-to-quarter. If they even meet or just barely beat, it will be a huge victory for CENX.
Can it happen? Last quarter, the company was hit with speculation about high energy costs of a facility in Kentucky that was outlined as rising at the end of 2010. This has been priced into the stock. This quarter, investors will be looking for the company to prove they can improve profitability and will be looking at how the company reacts to AA. Further, investors may be waiting to see if Centex could strike a deal with Southwire, their Kentucky energy provider. If they have not, it won’t hurt the stock. If they have, it will be a huge boost on top of what I expect are going to be earnings that will help fuel this stock.
You don’t like to see 6.5% decline the day before earnings, but the stock is definitely undervalued and producing a solid opportunity for investors. The stock with today’s decline is right at its lower bollinger band and heavily oversold. Even with a miss or
awful earnings, the stock has already been hit pretty hard. I don’t expect it can decline too much further than this.
We want to get involved now and get ready for a big jump tomorrow.
Entry: We want to get involved at 14.10 – 14.20.
Exit: We are looking to exit in the first couple minutes of tomorrow’s session for whatever gains or losses.
Good Investing,
David Ristau
