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The US and China are heavily subsidizing the historic transition to electric vehicles (EVs). The Biden admin has committed to have at least 50% of new car sales be electric by 2030. Through private-public partnerships, like the EV Acceleration Challenge, battery manufacturers alone are poised to invest $100 billion to pursue that goal.

The ultimate goal is to achieve net zero emissions by 2050. Most recently, Biden administration insiders told Bloomberg that $6.3 billion worth of grants will be awarded to decarbonize American heavy industry. From cement and glass products to metals and paper, these industries make up nearly 25% of greenhouse gas emissions (GHG).

The Department of Energy (DOE) is purportedly to announce on Monday that the Office of Clean Energy Demonstrations (OCED) will be in charge of allocating the funds. Under the ESG umbrella, which companies could benefit from Biden’s latest decarbonization move?

Century Aluminum (Nasdaq: CENX)

Year-to-date, Century Aluminum is up 7.5%. In addition to aluminum products, the company manufactures carbon anodes that are heavily used in lithium-ion secondary batteries and fluorides. In October 2023, Century signed a 3-year contract with Santee Cooper to use Mt. Holly.

The electricity provider will provide the aluminum smelter with 295 MW of power until December 2026. On the decarbonization front, Century announced its intent to partner with MX Holdings to establish a new joint venture this month. The venture aims to produce advanced alloys from recycled content with the aid of a low-carbon secondary billet.

In the latest Q4 2023 earnings, Century ended the fiscal year with $2.18 billion in net sales, leaving a $43.1 million net loss. That is unsurprising, given that cyclical trends and fluctuating aluminum prices bind the sector. Yet, the company beat the market forecast of negative $0.23 earnings per share at positive $0.3 EPS for the quarter.

Based on three analyst insights pulled by Nasdaq, the average CENX price target is $13 vs the current $12.84 per share. However, this does not fully account for the potential for the decarbonization grant.

Cleveland-Cliffs Inc. (NYSE: CLF)

This flat-rolled steel producer follows the same trend as CENX, having gained 7.7% value year-to-date. In addition to flat-rolled steel and iron ore pellets, the company generates revenue from renting real estate property. The company has made great strides in decarbonization, making it a likely grant candidate.

Cleveland-Cliffs integrated natural gas instead to ditch coal injections in steel production. By 2023, the company had already reduced 32% of emissions, ahead of planned 25% by 2030. The company is also involved in carbon capture via the Burns Harbor project, aiming to capture up to 2.8 million tons of CO2 annually.

In January, Cleveland-Cliffs finalized its cutting-edge hydrogen injection trial at the Indian Harbor facility. For the full year 2023, the company ended with $22 billion in revenue and $2.3 billion cash flow from operations, ending the year with $399 million net income vs. $1.3 billion in 2022.

For Q4 2023, Cleveland-Cliffs also beat the market estimate at negative $0.05 vs. the $0.07 EPS forecasted. Based on 10 analyst inputs pulled by Nasdaq, the average CLF price target is $19.32 vs. the current $21.30 per share. The high estimate is $24 vs. the low forecast of $11.41 per share.

Kimberly-Clark Corporation (NYSE: KMB)

Texas-based Kimberly-Clark manufactures a wide range of paper-based products, from hygiene to workplace. Over one year, the company’s KMB stock broke even at -1.8% returns. To achieve its net zero goals, the company committed to a decade-long Power Purchase Agreement (PPA) last November to power its operations with wind.

In May 2022, the company received the Net-Zero Award at the first-ever UK Paper Industry Gold Awards. This was largely fueled by the PPA with Octopus Energy in 2021 to build onshore wind farms in Scotland. In March 2024, Kimberly-Clark received the World’s Most Ethical Companies recognition by Ethisphere. 

For fiscal year 2023, the company yielded a 7% year-over-year gross profit increase to $1.7 billion while increasing its operating margin by 150 bps. Kimberly-Clark’s net income largely remained the same at $509 million vs $507 million the year prior. Of the last four quarters, only the last Q4 failed to beat the EPS forecast at an estimated $1.53 vs the reported $1.51 earnings per share.

Based on 18 analyst inputs pulled by Nasdaq, the average KMB price target is $125.55 vs. the current $125.05. The high estimate is $145, while the low forecast is $110 per share.

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