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Arconic (ARNC) Shares Surge 87% YTD: What's Behind the Rally?

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Shares of Arconic Inc. ARNC have shot up 86.7% so far this year. The company has also outperformed its industry’s rise of roughly 34.7% over the same time frame.  Moreover, it has trounced the S&P 500’s gain of 27.2% year to date.

Arconic has a market cap of roughly $14 billion. Average volume of shares traded in the last three months was around 2,949.4K.


Let’s take a look at the factors that are driving this Zacks Rank #2 (Buy) stock.

What’s Going in ARNC’s Favor?

Upbeat outlook and strong growth prospects have contributed to the run-up in Arconic’s shares. The company, in November, raised its earnings guidance for full-year 2019. Arconic now expects adjusted earnings in the range of $2.07-$2.11 per share for 2019, up from its earlier expectation of $1.95-$2.05 per share. The revised guidance partly reflects the benefits of its cost reduction actions.

The trend in earnings estimate revisions also indicates a solid earnings outlook for Arconic. Over the past three months, the Zacks Consensus Estimate for 2019 has increased by 6.5%. The Zacks Consensus Estimate for fourth-quarter 2019 has also moved up roughly 8% over the same timeframe.

Growth prospects for Arconic also look encouraging. The Zacks Consensus Estimate for earnings for 2019 is currently pegged at $2.13 per share, reflecting an expected year-over-year growth of 56.6%. The same for the fourth quarter stands at 51 cents, indicating a year-over-year growth of 63.6%.

Arconic is gaining from demand strength in automotive and aerospace markets. The company is seeing healthy demand in aero engines and aero defense markets with double digit growth in organic revenues as witnessed in the third quarter. Volume gains in the commercial transportation market is also contributing to its organic revenue growth. Strength across these key markets is expected to support the company’s full-year revenues.

Moreover, Arconic is focused on cost reduction and operational improvements across its businesses, which should drive its bottom line in 2019. The company has raised the annualized cost reduction commitment to roughly $280 million on a run-rate basis, from its prior expectation of $260 million. It expects to capture around $180 million of savings in 2019, also up from earlier commitment of $140 million.

Arconic Inc. Price and Consensus


Arconic Inc. Price and Consensus

Arconic Inc. price-consensus-chart | Arconic Inc. Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Franco-Nevada Corporation (FNV - Free Report) and General Moly, Inc. GMO.

Kirkland Lake Gold has projected earnings growth rate of 97.1% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 65% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franco-Nevada has estimated earnings growth rate of 45.3% for the current year and carries a Zacks Rank #2. The company’s shares have shot up roughly 34% in a year’s time.

General Moly has a projected earnings growth rate of 12.5% for the current year and carries a Zacks Rank #2. The company’s shares have gained roughly 8% in a year’s time.

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