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Why Is Arconic (ARNC) Up 6.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Arconic (ARNC). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Arconic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Arconic's Earnings & Revenues Top Estimates in Q2

Arconic swung to a loss (as reported) of $121 million or 27 cents per share in second-quarter 2019, from a profit of $120 million or 24 cents in the prior-year quarter. The bottom line was hurt by non-cash asset impairment charges of $357 million.

Barring one-time items, adjusted earnings per share were 58 cents, up from 37 cents a year ago. The figure topped the Zacks Consensus Estimate of 50 cents.

Arconic generated revenues of $3,691 million, up around 3% year over year. It beat the Zacks Consensus Estimate of $3,641.7 million.

Organic revenues rose 10% year over year on the back of strong volumes across all segments and major markets and favorable pricing.

Segment Highlights

EP&S: Revenues in the division were $1.6 billion, up 6% year over year. Organic revenues in the segment rose 8%, supported by growth in aerospace engines and defense.

GRP: Revenues in the division came in at $1.6 billion in the quarter, essentially flat year over year. Organic revenues in the segment went up 11%.

TCS: Revenues in the segment were $548 million, down 2% year over year. Organic revenues rose 3%.

Financial Position

Arconic had cash and cash equivalents of $1,357 million at the end of the quarter, down around 7% year over year. Long-term debt fell roughly 7% year over year to $5,901 million.

Cash provided from operations was $106 million in the reported quarter.

Outlook

Arconic continues to expect revenues in the range of $14.3-$14.6 billion for 2019. The company has raised its adjusted earnings guidance to the range of $1.95-$2.05 per share 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 expects adjusted earnings for the third quarter to be in the range of 47-53 cents.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 5.76% due to these changes.

VGM Scores

At this time, Arconic has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arconic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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