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Arconic (ARNC) Trails Earnings and Sales Estimates in Q4

Zacks Equity Research

Arconic Inc. ARNC recorded net income (as reported) of $309 million or 70 cents per share in fourth-quarter 2019, up from $218 million or 44 cents in the prior-year quarter.

Barring one-time items, adjusted earnings per share (EPS) came in at 53 cents. The figure trailed the Zacks Consensus Estimate of 54 cents.

Revenue fell 2% year over year to $3,401 million and missed the Zacks Consensus Estimate of $3,469 million.

Organic revenue inched up 1% year over year on the back of favorable product pricing and growth in the packaging, aerospace as well as industrial markets. However, this was significantly offset by softness in commercial transportation, automotive as well as building and construction markets.

2019 Highlights

In 2019, total revenue rose 1% year over year to $14.2 billion and organic revenue rose 7%.

Net income came in at $470 million or $1.03 per share in 2019, down from $642 million or $1.30 per share in 2018.

Arconic Inc. Price, Consensus and EPS Surprise

Arconic Inc. Price, Consensus and EPS Surprise

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

 

Segment Highlights

Investors may note that in third-quarter 2019, the company realigned its operations and eliminated the Transportation and Construction Solutions (TCS) segment. The company transferred the Forged Wheels business to its Engineered Products and Forgings segment (earlier known as the Engineered Products and Solutions segment) and moved the Building and Construction Systems business to the Global Rolled Products segment.

Engineered Products and Forgings (EP&F): Revenue in the division totaled $1.7 billion in the fourth quarter, up 1% year over year. Organic revenue in the segment rose 2%, supported by volume growth in aerospace that were partly offset by softness in commercial transportation.

Global Rolled Products (GRP): Revenue in the division amounted to $1.7 billion in the reported quarter, down 5% year over year. Organic revenue in the segment were flat on a year-over-year basis.

Financial Position

As of Dec 31, 2019, Arconic had cash and cash equivalents of $1,648 million, down 27.6% year over year. Long-term debt fell 16.8% year over year to $4,906 million.

Adjusted free cash flow in 2019 nearly doubled year over year to $815 million from $465 million.

Outlook

Arconic has issued guidance for full-year 2020.

The company expects sales in the range of $13.9-$14.2 billion. Adjusted EPS for 2020 is projected in the band $2.22-$2.42. Moreover, it expects adjusted free cash flow to be between $800 million and $900 million for 2020.

Arconic also expects adjusted EPS for first-quarter 2020 in the range of 47-53 cents.

Price Performance

Arconic's shares have surged 59.4% in the past year compared with the industry’s 20.5% rise.



Zacks Rank & Key Picks

Arconic currently carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp. DQ, Royal Gold, Inc. RGLD and Bunge Ltd. BG, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 47.9% in the past year.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. Its shares have returned 38.3% in the past year.    

Bunge has an expected earnings growth rate of 30.7% for 2020. The company’s shares inched up 0.7% in the past year.

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