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Can Arconic (ARNC) Maintain Earnings Beat Streak in Q2?

Zacks Equity Research

Arconic Inc. ARNC is scheduled to come up with second-quarter 2019 results before the opening bell on Aug 2. The company is expected to benefit from strength across its key end-markets, especially aerospace, automotive and commercial transportation, and its actions to improve its operations in the to-be-reported quarter.

Arconic beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. In this timeframe, the company delivered an average positive surprise of 12.9%.

The Zacks Consensus Estimate for revenues for Arconic for the second quarter stands at $3,642 million, reflecting an expected year over year growth of 1.9%.

Arconic's shares have gained around 49.1% year to date, outperforming the roughly 20.9% rise recorded by the industry.


Let’s see how things are shaping up for this announcement.

What the Zacks Model Says

Our proven model shows that Arconic is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here, as you will see below:

Earnings ESP: Earnings ESP for Arconic is +0.83%. The Most Accurate Estimate is 51 cents and the Zacks Consensus Estimate is pegged at 50 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Arconic currently carries a Zacks Rank #1, which when combined with a positive ESP makes us reasonably confident of earnings beat.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Some Factors to Consider

Arconic remains focused on cost reduction and operational improvements across its businesses, which should lend support to its bottom line in the June quarter. The company will likely to benefit from its cost saving actions in the to-be-reported quarter. Arconic plans to cut operating costs by around $230 million on an annual run-rate basis with $120 million is expected to be realized in 2019.

The company should also benefit from strong demand across automotive and aerospace markets in the second quarter. Arconic is seeing strong momentum in the automotive market, driven by the transition of the auto industry to lightweighting. It is also witnessing healthy demand trends in the aerospace market and is actively pursuing its aerospace expansion strategy.

Arconic is seeing strength in aero engines and aero defense, as reflected by volume gains in these markets. Strong volume growth in the commercial transportation market is also contributing to its revenue growth. Momentum across these major markets is expected to continue in the second quarter, providing support to the company’s top line. Higher expected volumes across major end-markets will likely contribute to organic revenue growth in the quarter. The company is also expected to gain from favorable pricing in aerospace, industrial and commercial transportation markets.

Arconic Inc. Price and EPS Surprise


Arconic Inc. Price and EPS Surprise

Arconic Inc. price-eps-surprise | Arconic Inc. Quote

Stocks That Warrant a Look

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

Barrick Gold Corporation GOLD has an Earnings ESP of +0.70% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carpenter Technology Corporation CRS has an Earnings ESP of +0.27% and carries a Zacks Rank #3.

Covia Holdings Corporation CVIA has an Earnings ESP of +20.00% and a Zacks Rank #3.

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