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Arconic (ARNC) Q3 Earnings: What's in Store for the Stock?
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Arconic Inc. is scheduled to come up with its third-quarter 2018 results before the opening bell on Oct 30.
Arconic’s adjusted earnings of 37 cents per share for the second quarter of 2018 topped the Zacks Consensus Estimate of 29 cents, translating into a 27.6% positive surprise.
Revenues rose around 10% year over year to $3,573 million in the quarter, also beating Zacks Consensus Estimate of $3,475 million. The company saw higher volumes across commercial transportation, automotive, aerospace engines, defense and building & construction markets.
Arconic beat estimates in three of the trailing four quarters while missed on the other occasion. In this timeframe, it delivered an average positive surprise of 13.9%.
Arconic's shares have lost around 11.1% over the past six months, compared with roughly 29.3% decline recorded by the industry.
Let's see how things are shaping up for this announcement.
Earnings Whispers
Our proven model shows that Arconic is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP: Earnings ESP for Arconic is currently pegged at +6.42%. This is because the Most Accurate Estimate stands at 32 cents while the Zacks Consensus Estimate is pegged at 30 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Arconic currently carries a Zacks Rank #3. The combination of a favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Arconic, in July, 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.
The company also announced that it has started the sale process of the Building and Construction Systems (BCS) business, a leading supplier of building materials and construction systems.
The Zacks Consensus Estimate for revenues for Arconic for the third quarter stands at $3,484 million, reflecting an expected year over year growth of 7.7%.
Arconic is focusing on cost reduction and productivity improvements across its businesses, which should lend support to its bottom line in the to-be-reported quarter. The company gained from net cost saving in the last reported quarter and is expected to continue to benefit from its cost actions in the September quarter.
Arconic is also seeing strong momentum in automotive, driven by the transition of the auto industry to lightweighting. Moreover, the company is witnessing healthy demand trends in the aerospace market and is actively pursuing its aerospace expansion strategy. It is well placed to gain from major contract wins in aerospace. Arconic is witnessing strong momentum in commercial aero engines. Strong volume gains in the commercial transportation market is also contributing to its revenue growth. Momentum across these major markets is expected to continue in the third quarter, providing support to the company’s top line.
However, Arconic is exposed to headwind from charges associated with higher aluminum prices, driven by LIFO (last-in, first-out) method of inventory accounting, increased processing costs and metal lag. Aluminum prices rose 30% year over year in the second quarter and hurt the company’s operating income by $20 million. Prices have increased sharply in the wake of aluminum tariffs.
The company sees an unfavorable impact from elevated aluminum prices of around $130 million in 2018 with most of the impact is expected in the second half. Higher aluminum prices are likely to continue to affect the company’s operating margin in the third quarter.
Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Arconic (ARNC) Q3 Earnings: What's in Store for the Stock?
Arconic Inc. is scheduled to come up with its third-quarter 2018 results before the opening bell on Oct 30.
Arconic’s adjusted earnings of 37 cents per share for the second quarter of 2018 topped the Zacks Consensus Estimate of 29 cents, translating into a 27.6% positive surprise.
Revenues rose around 10% year over year to $3,573 million in the quarter, also beating Zacks Consensus Estimate of $3,475 million. The company saw higher volumes across commercial transportation, automotive, aerospace engines, defense and building & construction markets.
Arconic beat estimates in three of the trailing four quarters while missed on the other occasion. In this timeframe, it delivered an average positive surprise of 13.9%.
Arconic's shares have lost around 11.1% over the past six months, compared with roughly 29.3% decline recorded by the industry.
Let's see how things are shaping up for this announcement.
Earnings Whispers
Our proven model shows that Arconic is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP: Earnings ESP for Arconic is currently pegged at +6.42%. This is because the Most Accurate Estimate stands at 32 cents while the Zacks Consensus Estimate is pegged at 30 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Arconic currently carries a Zacks Rank #3. The combination of a favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Arconic, in July, 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.
The company also announced that it has started the sale process of the Building and Construction Systems (BCS) business, a leading supplier of building materials and construction systems.
The Zacks Consensus Estimate for revenues for Arconic for the third quarter stands at $3,484 million, reflecting an expected year over year growth of 7.7%.
Arconic is focusing on cost reduction and productivity improvements across its businesses, which should lend support to its bottom line in the to-be-reported quarter. The company gained from net cost saving in the last reported quarter and is expected to continue to benefit from its cost actions in the September quarter.
Arconic is also seeing strong momentum in automotive, driven by the transition of the auto industry to lightweighting. Moreover, the company is witnessing healthy demand trends in the aerospace market and is actively pursuing its aerospace expansion strategy. It is well placed to gain from major contract wins in aerospace. Arconic is witnessing strong momentum in commercial aero engines. Strong volume gains in the commercial transportation market is also contributing to its revenue growth. Momentum across these major markets is expected to continue in the third quarter, providing support to the company’s top line.
However, Arconic is exposed to headwind from charges associated with higher aluminum prices, driven by LIFO (last-in, first-out) method of inventory accounting, increased processing costs and metal lag. Aluminum prices rose 30% year over year in the second quarter and hurt the company’s operating income by $20 million. Prices have increased sharply in the wake of aluminum tariffs.
The company sees an unfavorable impact from elevated aluminum prices of around $130 million in 2018 with most of the impact is expected in the second half. Higher aluminum prices are likely to continue to affect the company’s operating margin in the third quarter.
Arconic Inc. Price and EPS Surprise
Arconic Inc. price-eps-surprise | Arconic Inc. Quote
Other Stocks to Consider
Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:
CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +8.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>