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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 popped around 17% 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 so far this year. The company’s shares have surged 53.2% compared with roughly 5.4% rise recorded by the industry. The company has also outpaced the S&P 500’s gain of 16.7% for the same period.



 

 

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%.

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 9.1%. The Zacks Consensus Estimate for third-quarter 2019 has also moved up roughly 6.3% over the same timeframe.

Strong Growth Prospects

Growth prospects for Arconic look encouraging. The Zacks Consensus Estimate for earnings for 2019 for Arconic is currently pegged at $2.04 per share, reflecting an expected year-over-year growth of 50%. The same for the third quarter stands at 51 cents, indicating a year-over-year growth of 59.4%.

Upbeat Outlook

Arconic, in August, raised its earnings and cash flow guidance for full-year 2019. The company now sees adjusted earnings to be in the range of $1.95-$2.05 per share, up from the prior view of $1.75-$1.90 per share. Moreover, it now expects adjusted free cash flow to be in the band of $700-$800 million, up from $650-$750 million expected earlier.

The company continues to expect 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 now plans to cut operating costs by around $260 million (up from $230 million expected earlier) on an annual run-rate basis with $140 million is expected to be realized in 2019.

The company should also benefit from strong demand across automotive and aerospace markets. 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 markets with double digit growth in organic revenues as witnessed in the second quarter. 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. 

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 Kinross Gold Corporation KGC, NewMarket Corporation NEU and SSR Mining Inc. SSRM.

Kinross has projected earnings growth rate of 150% for the current year and carries a Zacks Rank #1. The company’s shares have surged around 66% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

NewMarket has an expected earnings growth rate of 16.2% for the current year and carries Zacks Rank #1. Its shares have gained around 18% in the past year.

SSR Mining has an estimated earnings growth rate of 165.2% for the current year and carries a Zacks Rank #2 (Buy). Its shares have shot up roughly 89% in the past year.

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