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Earnings Time for Arconic, Amid Controversy

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Part 2
Earnings Time for Arconic, Amid Controversy PART 2 OF 4

Inside Arconic’s 1Q17 Revenue Expectations: The Word on Wall Street

Arconic’s 1Q17 revenues

According to data compiled by Thomson Reuters, analysts expect Arconic (ARNC) to post revenues of $3.0 billion for 1Q17 and $3.1 billion for 2Q17. The company posted revenues of $3.0 billion for 4Q16. We should note, however, that we don’t have comparable data for the corresponding quarter last year due to the company’s recent split with Alcoa.

Inside Arconic&#8217;s 1Q17 Revenue Expectations: The Word on Wall Street

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Company guidance

Arconic has given a revenue guidance of $2.8 billion–$3.0 billion for 1Q17. The company’s guidance assumes LME (London Metals Exchange) cash prices at $1,650 per metric ton. However, LME aluminum prices were higher in 1Q17 as compared to what Arconic has assumed in its guidance. LME cash prices averaged $1,853 per metric ton in 1Q17, as compared to $1,710 per metric ton in 4Q16. (This calculation is based on closing prices basis.)

Arconic (ARNC) houses the business segments that had previously been under the GRP (Global Rolled Products), TCS (Transportation and Construction Solutions), and EPS (Engineered Products and Solutions) segments of the consolidated Alcoa company. Before the split, the GRP segment catered to the fast-growing auto sheet market while also producing commodity-grade can sheet products. However, some of the rolling mills producing commodity grade products were transferred to Alcoa (AA) after the split.

Key drivers

US auto sales have shown signs of moderation in 2017, with sales falling on a yearly basis in 1Q17. There have also been short-term concerns over the aerospace sector (ITA) (CSTM). Arconic has pointed out pricing pressure from aerospace customers (BA) as a headwind for the company, as the automobile and aerospace sectors are Arconic’s key end markets.

Meanwhile, Arconic’s profit margins have also come under pressure due to pricing. In the next part, we’ll discuss whether the company can report a margin expansion in 1Q17.

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