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Arconic Inc. logged a net loss, as reported, of $1.2 billion or $2.88 per share for the fourth quarter of 2016. The results include $1.4 billion of one-time items including charges related to the separation of Alcoa Inc. and restructuring and other separation costs.
Arconic, formerly known as Alcoa Inc., is a global leader in multi-material, precision engineered products and solutions for a variety of industries. The separation of Alcoa Inc. into two independent, publicly traded companies – Arconic Inc. and Alcoa Corporation (AA - Free Report) – was completed and became effective on Nov 1, 2016.
Alcoa Inc. changed its name to Arconic Inc. on Oct 31, 2016 in connection with its business separation. This is Arconic’s first quarterly report following the separation.
Barring one-time items, earnings came in at 12 cents per share for the reported quarter. The results beat the Zacks Consensus Estimate of 11 cents. Arconic recorded productivity gains of $186 million across all segments that more than offset higher costs and unfavorable price and mix.
Revenues for the quarter were $2,967 million, also coming ahead of the Zacks Consensus Estimate of $2,925 million.
Engineered Products and Solutions (EPS) – Revenues from the division came in at $1.4 billion in the fourth quarter. After-tax operating income (ATOI) was $138 million in the quarter. The segment gained from contributions of the RTI acquisition and productivity gains, partly offset by unfavorable pricing and mix, higher costs and investments in growth projects.
Global Rolled Products (GRP) – The division recorded sales of $1.1 billion in the quarter. ATOI came in at $45 million. Productivity gains and higher volumes in automotive were offset by higher costs, lower volumes in the heavy-duty truck market in North America, aerospace destocking and unfavorable currency impact.
Transportation and Construction Solutions (TCS) – The segment logged sales of $456 million and ATOI of $44 million in the quarter. The division gained from strong productivity gains and growth in the building and construction business.
Financial Position
Arconic ended the quarter with cash and cash equivalents of roughly $1.9 billion. Long-term debt was around $8 billion at the end of the quarter. Free cash flow for the fourth quarter was $354 million.
Outlook
Moving ahead, Arconic said that it will remain focused on cost cutting and improving margin and return on net assets in 2017.
For first-quarter 2017, the company sees revenues in the band of $2.8 billion to $3 billion and adjusted EBITDA of $420 million to $450 million.
For full-year 2017, Arconic expects revenues in the range of $11.8 billion to $12.4 billion, including $400 million of unfavorable impact from the Tennessee packaging ramp down. Adjusted EBITDA margin for the year is expected to be roughly 15%. The company projects adjusted earnings, barring special items, of $1.10 to $1.20 per share for 2017.
Arconic also expects free cash flow of $350 million or more for the full year. The company expects to reduce debt by $1 billion in 2017.
Price Performance
Arconic has underperformed the Zacks categorized Mining-Non Ferrous industry year to date. The company’s shares have gained around 19.9% over this period, compared with roughly 21.4% gain recorded by the industry.
Teck Resources has an expected long-term growth of 10.7%.
Hudbay Minerals has an expected earnings growth of 362.5% for the current year.
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Arconic's (ARNC) Q4 Earnings & Revenues Beat Estimates
Arconic Inc. logged a net loss, as reported, of $1.2 billion or $2.88 per share for the fourth quarter of 2016. The results include $1.4 billion of one-time items including charges related to the separation of Alcoa Inc. and restructuring and other separation costs.
Arconic, formerly known as Alcoa Inc., is a global leader in multi-material, precision engineered products and solutions for a variety of industries. The separation of Alcoa Inc. into two independent, publicly traded companies – Arconic Inc. and Alcoa Corporation (AA - Free Report) – was completed and became effective on Nov 1, 2016.
Alcoa Inc. changed its name to Arconic Inc. on Oct 31, 2016 in connection with its business separation. This is Arconic’s first quarterly report following the separation.
Barring one-time items, earnings came in at 12 cents per share for the reported quarter. The results beat the Zacks Consensus Estimate of 11 cents. Arconic recorded productivity gains of $186 million across all segments that more than offset higher costs and unfavorable price and mix.
Revenues for the quarter were $2,967 million, also coming ahead of the Zacks Consensus Estimate of $2,925 million.
Arconic Inc. Price, Consensus and EPS Surprise
Arconic Inc. Price, Consensus and EPS Surprise | Arconic Inc. Quote
Segment Highlights
Engineered Products and Solutions (EPS) – Revenues from the division came in at $1.4 billion in the fourth quarter. After-tax operating income (ATOI) was $138 million in the quarter. The segment gained from contributions of the RTI acquisition and productivity gains, partly offset by unfavorable pricing and mix, higher costs and investments in growth projects.
Global Rolled Products (GRP) – The division recorded sales of $1.1 billion in the quarter. ATOI came in at $45 million. Productivity gains and higher volumes in automotive were offset by higher costs, lower volumes in the heavy-duty truck market in North America, aerospace destocking and unfavorable currency impact.
Transportation and Construction Solutions (TCS) – The segment logged sales of $456 million and ATOI of $44 million in the quarter. The division gained from strong productivity gains and growth in the building and construction business.
Financial Position
Arconic ended the quarter with cash and cash equivalents of roughly $1.9 billion. Long-term debt was around $8 billion at the end of the quarter. Free cash flow for the fourth quarter was $354 million.
Outlook
Moving ahead, Arconic said that it will remain focused on cost cutting and improving margin and return on net assets in 2017.
For first-quarter 2017, the company sees revenues in the band of $2.8 billion to $3 billion and adjusted EBITDA of $420 million to $450 million.
For full-year 2017, Arconic expects revenues in the range of $11.8 billion to $12.4 billion, including $400 million of unfavorable impact from the Tennessee packaging ramp down. Adjusted EBITDA margin for the year is expected to be roughly 15%. The company projects adjusted earnings, barring special items, of $1.10 to $1.20 per share for 2017.
Arconic also expects free cash flow of $350 million or more for the full year. The company expects to reduce debt by $1 billion in 2017.
Price Performance
Arconic has underperformed the Zacks categorized Mining-Non Ferrous industry year to date. The company’s shares have gained around 19.9% over this period, compared with roughly 21.4% gain recorded by the industry.
Zacks Rank & Key Picks
Arconic is a Zacks Rank #2 (Buy) stock.
Other well-placed companies in the basic materials space include Teck Resources Limited (TECK - Free Report) and Hudbay Minerals Inc. (HBM - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Teck Resources has an expected long-term growth of 10.7%.
Hudbay Minerals has an expected earnings growth of 362.5% for the current year.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>