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Why Is Arconic (ARNC) Down 17.1% Since its Last Earnings Report?

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A month has gone by since the last earnings report for Arconic Inc. (ARNC - Free Report) . Shares have lost about 17.1% in that time frame.

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

Arconic's Earnings and Sales Beat Estimates in Q1

Arconic reported net income of $143 million or 29 cents per share for the first quarter of 2018, down from $322 million or 65 cents a year ago.  

Barring one-time items, adjusted earnings came in at 34 cents per share for the reported quarter, which beat the Zacks Consensus Estimate of 32 cents.

Arconic reported revenues of $3,445 million, up around 7.9% year over year, which surpassed the Zacks Consensus Estimate of $3,329.6 million.

Segment Highlights

EP&S: Revenues from the division came in at $1.5 billion for the first quarter, up 4% year over year. Organic revenues for the segment rose 2% supported by growth in aerospace engines, defense and industrial, which more than offset the continued slump in the industrial gas turbine market and challenges in aerospace airframe production mix, related to fastening systems.

Operating profit for the segment fell 10.5% year over year owing to unfavorable product mix, higher input costs and performance shortfalls in Rings and Disks, which more than offset the strength in aerospace engines.

GRP: The division recorded sales of $1.4 billion in the quarter, up 9% year over year.

Operating profit for the segment, however, declined 17.6% year over year due to unfavorable aerospace wide-body production mix and higher aluminum prices, partly offset by higher automotive volume.  

TCS: The segment logged sales of $537 million, up 18% year over year.

Operating profit was down 1.4% as favorable foreign currency swings, higher volume in commercial transportation and building and construction and net cost savings were more than offset by unfavorable product price and mix and higher aluminum prices.

Financial Position

Arconic ended the first quarter with cash and cash equivalents of roughly $1,205 million, down around 52.8% year over year.

Long-term debt fell 21.6% year over year to $6,309 million.

Outlook

Arconic provided updated full-year 2018 guidance. The company now expects revenues for 2018 in the range of $13.7 billion to $14 billion (up from $13.4-$13.7 billion projected earlier). It now expects adjusted earnings to be in the range of $1.17-$1.27 per share (down from $1.45-$1.55) and free cash flow to be around $250 million (down from prior guidance of roughly $500 million).
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 23.4% due to these changes.

Arconic Inc. Price and Consensus

VGM Scores

At this time, ARNC has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise ARNC has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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