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Why Should You Add Arconic (ARNC) Stock to Your Portfolio?

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 26% over the past six months.

Arconic currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or #2 (Buy), offer the best investment opportunities for investors.

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 Arconic 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 shot up 51.8% compared with roughly 2.5% rise recorded by the industry. The company has also outpaced the S&P 500’s gain of roughly 16.5% for the same period.



 

Upbeat View

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.

Estimates Going Up

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 4.1%. The Zacks Consensus Estimate for third-quarter 2019 has also moved up roughly 4.1% 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%.

Solid 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%.

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 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.

Moreover, 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.

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 a look in the basic materials space include Royal Gold, Inc RGLD, Kinross Gold Corporation KGC and Alamos Gold Inc. AGI, all sporting a Zacks Rank #1.

Royal Gold has a projected earnings growth rate of 82.1% for fiscal 2020. The company’s shares have rallied 64% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has projected earnings growth rate of 170% for the current year and carries a Zacks Rank #1. The company’s shares have surged around 62% in a year’s time.

Alamos Gold has estimated earnings growth rate of 340% for the current year. The company’s shares have gained roughly 17% in a year’s time.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>
 


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