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Arconic (ARNC) Up 4.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Arconic (ARNC - Free Report) . Shares have added about 4.6% 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 Beats Earnings & Revenue Estimates in Q4

Arconic logged profits (as reported) of $218 million or 44 cents per share in fourth-quarter 2018, against a net loss of $727 million or $1.51 per share in the prior-year quarter.

Barring one-time items, adjusted earnings per share (EPS) came in at 33 cents and beat the Zacks Consensus Estimate of 30 cents.

Revenues improved around 6.1% year over year to $3,472 million and surpassed the Zacks Consensus Estimate of $3,412.3 million.

Organic revenues rose 10% year over year on the back of higher volumes across all businesses, including double-digit growth in most major end markets.

2018 Highlights

In 2018, total revenues increased 8% year over year to $14 billion and organic revenues rose 7%.

Net income came in at $642 million or $1.30 per share, against a net loss of $74 million 28 cents per share.

Segment Highlights

EP&S: Revenues in the division totaled $1.6 billion for the reported quarter, up 8% year over year. Organic revenues in the segment rose 9%, supported by volume growth in aerospace engines and defense.

GRP: Revenues in the division amounted to $1.4 billion in the quarter, up 9% year over year. Organic revenues in the segment rose 13%.

TCS: Revenues in the segment amounted to $497 million, down 6% year over year. Organic revenues in the segment rose 4%.

Financial Position

As of Dec 31, 2018, Arconic had cash and cash equivalents of roughly $2,277 million, up around 5.9% year over year. Long-term debt fell roughly 13.4% year over year to $5,896 million.

Adjusted free cash flow in 2018 nearly tripled year over year to $465 million.

Outlook

Arconic provided guidance for full-year 2019. The company expects revenues in the range of $14.3-$14.6 billion. Adjusted EPS are projected in the band of $1.55-$1.65. Adjusted free cash flow is projected between $400 million and $500 million.

Portfolio Review Update

Arconic stated that its portfolio will be separated into Engineered Products & Forgings and Global Rolled Products. The company is considering the sale of businesses that do not fit into Engineered Products & Forgings or Global Rolled Products.

The company also plans to reduce its quarterly dividend from 6 cents to 2 cents per share.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Arconic has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Arconic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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