Arconic's (ARNC) Shares Rally 34% In 6 Months: Here's Why

Shares of Arconic Inc. (NYSE:ARNC) have popped 34% over the past six months. The company has also outperformed its industry’s rise of 7.9% over the same time frame.

Arconic has a market cap of roughly $12.8 billion. Average volume of shares traded in the last three months was around 3,185.5K.

Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.

What’s Driving ARNC?

Forecast-topping earnings performance in the third quarter, upbeat outlook and healthy growth prospects have contributed to the run-up in Arconic’s shares.

Arconic’s adjusted earnings per share for the third quarter were 58 cents, up from 32 cents a year ago. It also trounced the Zacks Consensus Estimate of 53 cents. The company bumped up its earnings guidance for full-year 2019.

Arconic now sees adjusted earnings in the range of $2.07-$2.11 per share for 2019, up from its earlier expectation of $1.95-$2.05 per share. The revised guidance partly reflects the benefits of the company’s cost reduction actions.

The trend in earnings estimate revisions also indicates a solid earnings outlook for Arconic. Over the past three months, the Zacks Consensus Estimate for 2019 has increased by around 5%.

The Zacks Consensus Estimate for earnings for 2019 for Arconic is currently pegged at $2.10 per share, reflecting an expected year-over-year growth of 54.4%.

Arconic remains focused on cost reduction and operational improvements across its businesses, which should lend support to its bottom line in 2019.

The company has raised the annualized cost reduction commitment to roughly $280 million on a run-rate basis, from its prior expectation of $260 million. It expects to capture around $180 million of savings in 2019, also up from earlier commitment of $140 million.

Arconic is also benefiting from strong demand across automotive and aerospace markets. The company is seeing strength in aero engines and aero defense markets with double digit growth in organic revenues as witnessed in the third quarter. Volume gains in the commercial transportation market is also contributing to its organic revenue growth.

Momentum across these major markets is likely to support the company’s revenues for full-year 2019. Although Arconic has trimmed its revenue expectations for 2019 considering lower expected aluminum prices and the impact of divestments, the revised guidance still reflects an organic growth of 6-7% year over year.

Stocks Worth a Look

Other stocks worth considering in the basic materials space include Agnico Eagle Mines Limited (NYSE:AEM) , Kirkland Lake Gold Ltd. (TSX:KL) and Franco-Nevada Corporation (TSX:FNV) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied roughly 73% in a year’s time.

Kirkland Lake Gold has projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 152% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 44.4% for the current year. The company’s shares have shot up roughly 48% in a year’s time.

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