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Arconic's (ARNC) Earnings and Sales Trounce Estimates in Q2

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Arconic Inc. (ARNC - Free Report) logged profits (as reported) of $120 million or 24 cents per share for the second quarter of 2018, down from $212 million or 43 cents a year ago. 

Barring one-time items, adjusted earnings came in at 37 cents per share for the reported quarter, which topped the Zacks Consensus Estimate of 29 cents.

Arconic reported revenues of $3,573 million, up around 10% year over year, exceeding the Zacks Consensus Estimate of $3,475 million. Organic revenues rose 5% year over year on the back of increased volumes across commercial transportation, automotive, aerospace engines, defense and building & construction markets.

Arconic Inc. Price, Consensus and EPS Surprise

 

Arconic Inc. Price, Consensus and EPS Surprise | Arconic Inc. Quote

 

Segment Highlights

Engineered Products and Solutions: Revenues from the division came in at $1.6 billion for the reported quarter, up 7% year over year. Organic revenues for the segment rose 6%, supported by growth in aerospace engines and defense.

Operating profit for the segment fell 15% year over year, impacted by unfavorable physical inventory adjustment, continued challenges in Rings and Disks and unfavorable product mix.

Global Rolled Products: The division recorded sales of $1.5 billion in the quarter, up 14% year over year.

Operating profit for the segment, however, declined roughly 8% year over year due to unfavorable aerospace wide-body production mix and increased aluminum prices. 

Transportation and Construction Solutions: The segment logged sales of $562 million, up 12% year over year.

Operating profit climbed 37% on the back of higher volume in commercial transportation and building & construction and cost savings.

Financial Position

Arconic ended the quarter with cash and cash equivalents of roughly $1,455 million, down around 22% year over year. Long-term debt fell roughly 22% year over year to $6,312 million.

Adjusted free cash flow doubled year over year to $289 million in the second quarter.

Outlook

Arconic reaffirmed its guidance for the full year. The company continues expect revenues for 2018 in the range of $13.7 billion to $14 billion. It also continues to expect adjusted earnings in the range of $1.17-$1.27 per share and adjusted free cash flow of around $250 million.

Price Performance

Arconic's shares have lost 15.9% over the past year, underperforming the 5.6% growth of the industry it belongs to.



 

Zacks Rank & Other Stocks to Consider

Arconic currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include KMG Chemicals, Inc. , Methanex Corp. (MEOH - Free Report) and Celanese Corp. (CE - Free Report) each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have gained roughly 39% over a year.

Methanex has an expected long-term earnings growth rate of 15%. The company’s shares have rallied around 53% in a year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have shot up roughly 20% over a year.

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