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Here's Why Arconic (ARNC) Stock is a Solid Choice Right Now

Zacks Equity Research

Arconic Inc.’s ARNC stock looks to be an attractive option for investors based on its strong growth prospects for 2019. The company’s shares have shot up around 25% over the past three months.

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

Let's take a look into the factors that make this Zacks Rank #1 (Strong Buy) stock a compelling choice at the moment.

Price Performance

Arconic has significantly outperformed the industry it belongs to over the past year. The company’s shares have popped 29.6% compared with roughly 29.1% decline recorded by the industry.  The company has also outpaced the S&P 500’s gain of 3.3% for the same period.


Estimates Going Up

Estimates for Arconic have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2019 has increased by around 8.4%. The Zacks Consensus Estimate for second-quarter 2019 has also moved up roughly 9.3% over the same timeframe.

Healthy Growth Prospects

Growth prospects for Arconic look encouraging. The Zacks Consensus Estimate for earnings for 2019 for Arconic is currently pegged at $1.80 per share, reflecting an expected year-over-year growth of 32.4%. The same for the second quarter stands at 47 cents, indicating a year-over-year growth of 27%.

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 12.9%.

Upbeat Outlook

Arconic, in April, raised its earnings and cash flow guidance for full-year 2019. The company expects adjusted earnings for 2019 in the range of $1.75-$1.90 per share, up from the prior expectations of $1.55-$1.65. Adjusted free cash flow is projected in the band of $650-$750 million, also up from the previous guidance of $400-$500 million.

The company also continues to see revenues in the range of $14.3-$14.6 billion for 2019.  

Growth Drivers in Place

Arconic is focusing on cost reduction and operational improvements across its businesses, which should lend support to its bottom line in 2019. The company 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.

Moreover, Arconic is witnessing strength in the automotive market, driven by the transition of the auto industry to lightweighting. It is also seeing healthy demand trends in the aerospace market and is actively pursuing its aerospace expansion strategy.

Arconic is seeing strong momentum in aero engines and aero defense markets. The company saw double digit growth in volumes in aero engines and aero defense in the first quarter of 2019, driving its organic revenues. Strong volume gains in the commercial transportation market is also contributing to its revenue growth.

Momentum across these major markets is expected to continue through 2019, providing support to the company’s top line. The company is also expected to gain from favorable pricing in aerospace, industrial and commercial transportation markets.

Arconic Inc. Price and Consensus


Arconic Inc. Price and Consensus
Arconic Inc. Price and Consensus

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

Other Stocks Worth a Look

Other stocks worth considering in the basic materials space include Materion Corporation MTRN, Israel Chemicals Ltd. ICL and Innospec Inc. IOSP.

Materion has an expected earnings growth rate of 27.3% for the current year and carries a Zacks Rank #1. The company’s shares have gained around 11% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current fiscal year and carries a Zacks Rank #2 (Buy). Its shares have gained around 9% in the past year.

Innospec has an expected earnings growth rate of 6.6% for the current year and carries a Zacks Rank #2. Its shares are up roughly 6% in the past year.

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