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Arconic (ARNC) Up 3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Arconic (ARNC). Shares have added about 3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Arconic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Arconic's Earnings Top Estimates in Q3, Revenues Lag

Arconic logged profits (as reported) of $95 million or 21 cents per share in third-quarter 2019, down 41% from a profit of $161 million or 32 cents in the prior-year quarter. The bottom line was hurt by non-cash asset impairment charges of $108 million.

Barring one-time items, adjusted earnings per share were 58 cents, up from 32 cents a year ago. The figure topped the Zacks Consensus Estimate of 53 cents.

Arconic recorded revenues of $3,559 million, up around 1% year over year. It missed the Zacks Consensus Estimate of $3,602.4 million.

Organic revenues rose 6% year over year on the back of strong volumes across major markets and favorable pricing.

Segment Highlights

EP&F: Revenues in the division were $1.8 billion, up 7% year over year. Organic revenues in the segment rose 8%, supported by growth in aerospace engines, defense and commercial transportation.

GRP: Revenues in the division fell 4% year over year to $1.8 billion in the quarter. Organic revenues in the segment went up 5%. The division gained from favorable pricing.

Financial Position

Arconic had cash and cash equivalents of $1,321 million at the end of the quarter, down around 14% year over year. Long-term debt fell roughly 22% year over year to $4,905 million.

Cash provided from operations was $52 million in the reported quarter.

Outlook

Arconic provided its updated full-year 2019 guidance. It now expects revenues in the range of $14.15-$14.35 billion, down from its prior view of $14.3-$14.6 billion.

The company raised its adjusted earnings guidance for 2019 to the range of $2.07-$2.11 per share from its earlier expectation of $1.95-$2.05 per share. Moreover, the company continues to expect adjusted free cash flow to be in the band of $700-$800 million for 2019.

Arconic also expects adjusted earnings for the fourth quarter to be in the range of 49-53 cents.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Arconic has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arconic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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