A month has gone by since the last earnings report for Arconic (ARNC). Shares have added about 3.6% 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's Earnings and Sales Trounce Estimates in Q2
Arconic 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.
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.
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.
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.
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. It expects to conclude the process in third-quarter 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Arconic has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arconic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.