Arconic's Advanced Stretcher To Expand Aerospace Leadership

Arconic Inc. (NYSE:ARNC) has completed the installation of the state-of-the-art manufacturing technology, Very Thick Plate Stretcher (“Stretcher”), which is capable of producing highly differentiated plates for the industrial and aerospace markets.

The process of stretching is part of the manufacturing process which reduces stress into plates. The plates can be easily processed and machined by customers later. This will help customers to redefine boundaries of design and performance.

The company said that the investment in advanced Stretcher was backed by client contracts including Airbus. The company invested around $150 million on the new technology and was able to complete the project on time, with roughly $40 million less than the budgeted amount.

The Chairman and CEO of Arconic, Klaus Kleinfeld said that the investment was made to expand the company’s leadership in the aerospace market and create profitable growth in the attractive industrial market.

Aerospace Market

In the aerospace market, the Stretcher material will enable the production of high-strength monolithic wing ribs, fuselage frames, and bulkheads of different shapes and sizes, giving engineers the flexibility to customize aircraft design, increase productivity and performance.

Last year, Airbus was one of the first customers of Arconic to ink a multi-year contract deal worth $1 billion for the supply of proprietary alloys and plate products for every Airbus platform. The deal provided Arconic an unprecedented position in the aluminum plate and sheet market. The Stretcher material is also included under the agreement that Arconic established with AMI Metals to support their contract with Lockheed Martin (NYSE:LMT) for producing Joint Strike Fighter.

The company expects to initiate product shipments to aerospace customers in the fourth quarter of 2017.

Industrial Market

The Stretcher is capable of producing some of the thickest, widest and longest plates for plastic manufacturing molds used in semiconductor and consumer electronics industry. The material will allow the manufacturers to increase productivity, reduce time and save cost.

Arconic is expected to initiate product shipments to industrial customers in second-quarter 2017.

Price Performance

Arconic’s shares gained 26.7% in the last three months, outperforming the Zacks categorized Mining-Non Ferrous industry’s gain of 2.6%. The stock gained momentum partly on the back of strong demand for its products across aerospace and automotive markets and its efforts to improve cost structure through company-wide productivity actions.

Arconic recorded adjusted earnings of 12 cents per share in the last reported quarter, beating the Zacks Consensus Estimate of 11 cents. The company, in its fourth-quarter call, said that it will remain focused on cost cutting and improving margin and return on net assets in 2017.

The company is seeing healthy demand trends in the aerospace market and is well placed to gain from major contract wins. Arconic is also well-positioned to capture the growing demand for aluminum sheet stemming from the transition of the North American auto industry to light-weighting. It is the market leader in providing aluminum sheet to the North American automotive market and expects the automotive sheet revenues to grow to $1.3 billion in 2018 from $76 million in 2010.

Arconic currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other stocks worth considering in the basic materials space include Lundin Mining Corp. (OTC:LUNMF) , Ternium S.A. (NYSE:TX) and ArcelorMittal (NYSE:MT) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lundin has an expected long-term earnings growth of 34.1%.

Ternium has an expected long-term earnings growth of 18.4%.

ArcelorMittal has an expected long-term earnings growth of 10.9%.

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