Arconic Inc.’s ARNC stock looks promising at the moment. The company’s shares are up 5.1% so far this month, outperforming the roughly 4.1% rise of its industry.
The company is well poised to benefit from strong growth across its key end-markets, especially aerospace, automotive and commercial transportation, and its actions to improve its operations.
Let's take a look into the factors that make Arconic stock an attractive investment option at the moment.
Solid Rank & VGM Score
Arconic currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
Estimates Going Up
Annual 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 3.1%. The Zacks Consensus Estimate for 2020 has also moved up roughly 7.2% 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 $1.64 per share, reflecting an expected year-over-year growth of 20.6%. The same for 2020 stands at $1.93, indicating a year-over-year growth of 18%.
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 12.6%.
Arconic expects 14-21% year over year improvement in adjusted earnings per share in 2019. It expects adjusted earnings for this year in the band of $1.55-$1.65 per share, reflecting an increase from $1.36 recorded in 2018.
The company remains focused on cost reduction and operational improvements across its businesses, which should lend support to its bottom line in 2019. It plans to cut operating costs by around $200 million on an annual run-rate basis, geared to maximize the impact 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. Strong volume gains in the commercial transportation market is also contributing to its revenue growth. The company saw double-digit year-over-year growth across automotive, aero engines, commercial transportation and aero defense markets in 2018.
Momentum across these major markets is expected to continue in 2019, providing support to the company’s top line. Arconic expects organic revenue growth of 6-8% in 2019 on the back of growth in most of its major end-markets.
Arconic Inc. Price and Consensus
Arconic Inc. Price and Consensus | Arconic Inc. Quote
Other Stocks Worth a Look
Other stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Ingevity Corporation NGVT and W. R. Grace & Co. GRA.
Kirkland has an expected earnings growth rate of 51.5% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 85% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingevity has an expected earnings growth rate of 17.9% for the current year and carries a Zacks Rank #2. Its shares have rallied roughly 48% in the past year.
W. R. Grace has an expected earnings growth rate of 10.4% for the current year and carries a Zacks Rank #2. Its shares have gained around 17% in the past year.
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