Arconic's (ARNC) Q3 Earnings Trail, Sales Beat Estimates

Arconic Inc. (NYSE:ARNC) 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 per share a year ago. The results in the reported quarter include special items including restructuring charges.

Barring one-time items, earnings came in at 25 cents per share for the reported quarter. The results missed the Zacks Consensus Estimate of 27 cents.

Arconic reported revenues of $3,236 million, up around 3% year over year. Sales topped the Zacks Consensus Estimate of $3,129 million. Revenues were driven by improved volumes across all segments and higher aluminum prices.

Arconic remains focused on cost reduction and delivered net cost savings of 1.5% of revenues in the reported quarter.

Segment Highlights

Engineered Products and Solutions (EPS) – Revenues from the division came in at $1.5 billion in the third quarter, up 5% year over year. Adjusted EBITDA rose 5% year over year to $312 million in the quarter, as improved aerospace volume and cost savings more than offset unfavorable price and mix.

Global Rolled Products (GRP) – The division recorded sales of $1.2 billion in the quarter, down 4% year over year. Adjusted EBITDA fell 2% year over year to $140 million, as lower aerospace wide-body build rates, airframe destocking and pricing pressure more than offset cost savings.

Transportation and Construction Solutions (TCS) – The segment logged sales of $517 million, up 15% year over year. Adjusted EBITDA increased around 9% to $83 million in the quarter on the back of increased volumes and cost savings that more than offset headwinds including unfavorable price and mix.

Financial Position

Arconic ended the quarter with cash and cash equivalents of roughly $1.8 billion. Long-term debt was around $6.8 billion at the end of the third quarter.

Outlook

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 billion to $12.8 billion (up from $12.3 billion to $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.

Price Performance

Arconic has outperformed the industry it belongs to year to date. The company’s shares have gained around 46.5% over this period, compared with roughly 35% gain recorded by the industry.

Zacks Rank & Key Picks

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

Better-ranked stocks in the basic materials space include Ingevity Corporation (NYSE:NGVT) , Huntsman Corporation (NYSE:HUN) and FMC Corporation (NYSE:FMC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has expected long-term earnings growth of 12%.

Huntsman has expected long-term earnings growth of 7%.

FMC has expected earnings growth of 11.3% for the current year.

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