Arconic (ARNC) To Invest $137M For New Heat Treat Furnace

Arconic Inc. (NYSE:ARNC) declared plans to set up a new horizontal heat treat furnace at its Davenport Works facility, Iowa.

Heat treatment is a necessary stage in the production of certain high-strength products. It is essential for products intended for large industrial and aerospace applications.

The furnace will allow Arconic to heat treat thicker and longer plate, including materials for thick plate stretcher, which started commercial production this year and is the largest thick plate stretcher in the world.

As demand for composite wings (made with monolithic thick plate wing ribs) is increasing, need for thick aluminum plate is also on the rise. According to Arconic, the new capability will address the increasing demand for plate used for aircraft wing skins, ribs and other structural components, mainly in single-aisle builds. Moreover, the investment also creates growth opportunity in other markets including injection molding for automotive applications and semi-conductors for consumer electronics.

Financial assistance from the Iowa Department of Economic Development and the City of Riverdale will support the $137-million investment. The assistance will include financing, tax and R&D credits along with training grants for the workforce at Davenport, once the contract has been finalized.

Construction of the project is anticipated to start in late 2017 while commercial production expected to commence in 2019.

Shares of Arconic have declined 2.3% in the last three months, underperforming the industry’s 0.5% growth.

Arconic logged profit, as reported, of $119 million or 22 cents per share for the third quarter of 2017, down from $166 million or 33 cents a year ago. Results in the quarter include special items including restructuring charges. Barring one-time items, earnings came in at 25 cents per share for the quarter. Results lagged the Zacks Consensus Estimate of 27 cents.

Arconic reaffirmed its full-year adjusted earnings guidance of $1.15-$1.20 per share. However, the company updated its revenue and capital expenditure outlook for 2017.

The company now sees revenues for 2017 in the range of $12.6-$12.8 billion (up from $12.3-$12.7 billion expected earlier). Arconic now expects capital expenditure to be roughly $600 million, compared with its prior view of up to $650 million.

Zacks Rank & Stocks to Consider

Arconic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are ArcelorMittal (NYSE:MT) , Westlake Chemical Corporation (NYSE:WLK) and Kronos Worldwide Inc. (NYSE:KRO) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

ArcelorMittal has an expected long-term earnings growth rate of 11.3%. Its shares have moved up 29.2% year to date.

Westlake Chemical has an expected long-term earnings growth rate of 10.4%. Its shares have rallied 68.3% year to date.

Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have surged a whopping 139.9% year to date.

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