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Here's Why Arconic (ARNC) Should Be in Your Portfolio Now

Zacks Equity Research

Arconic Inc.’s ARNC stock looks promising at the moment based on its compelling growth prospects for 2019. The company’s shares have popped around 39% over the past six months.

The company is well placed to gain from strong growth across its key end-markets and its actions to improve its operations. The trend in earnings estimate revisions also indicates a solid earnings outlook for Arconic.

Let's delve deeper into the factors that make this Zacks Rank #2 (Buy)
stock an attractive investment option at the moment.

An Outperformer

Arconic has significantly outperformed the industry it belongs to year to date. The company’s shares have surged 83.9% compared with 22.4% rise recorded by the industry. The company has also outpaced the S&P 500’s gain of 24.3% for the same period.


Upbeat Outlook

Arconic, earlier this month, raised its earnings guidance for full-year 2019. The company now sees adjusted earnings in the range of $2.07-$2.11 per share for 2019, up from its earlier expectation of $1.95-$2.05 per share. The revised guidance partly reflects the benefits of the company’s cost reduction actions.

Estimates Northbound

Estimates for Arconic have moved up over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2019 has increased by around 5%. The Zacks Consensus Estimate for fourth-quarter 2019 has also moved up roughly 8% over the same timeframe.

Positive Earnings Surprise History

Arconic has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 10.7%.

Strong Growth Prospects

Growth prospects for Arconic look encouraging. The Zacks Consensus Estimate for earnings for 2019 for Arconic is currently pegged at $2.10 per share, reflecting an expected year-over-year growth of 54.4%. The same for the fourth quarter stands at 54 cents, indicating a year-over-year growth of 63.6%.

Growth Drivers in Place

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

The company is seeing strength in aero engines and aero defense markets with double digit growth in organic revenues as witnessed in the third quarter. Volume gains in the commercial transportation market is also contributing to its organic revenue growth. Momentum across these major markets is likely to support the company’s revenues for full-year 2019.

Arconic also remains focused on cost reduction and operational improvements across its businesses, which should lend support to its bottom line in 2019. The company has raised the annualized cost reduction commitment to roughly $280 million on a run-rate basis, from its prior expectation of $260 million. It expects to capture around $180 million of savings in 2019, also up from earlier commitment of $140 million.

Arconic Inc. Price and Consensus


Arconic Inc. Price and Consensus

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

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Kirkland Lake Gold Ltd. KL and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied roughly 62% in a year’s time.

Kirkland Lake Gold has projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 151% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 46.2% for the current year. The company’s shares have shot up roughly 41% in a year’s time.

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