What Are Analysts Projecting for Arconic’s 4Q16 Revenues?



Arconic’s 4Q16 revenues

Arconic (ARNC) houses the business segments that were under the GRP (Global Rolled Products), TCS (Transportation and Construction Solutions), and EPS (Engineered Products and Solutions) businesses of the consolidated Alcoa (AA). In 3Q16, the GRP segment was the largest contributor to Alcoa’s downstream revenues. It accounted for 45% of the consolidated revenues. The EPS segment accounted for 42% of Alcoa’s 3Q16 downstream revenues, while the TCS segment contributed 13% to the revenues.

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Analysts’ estimates

According to data compiled by Thomson Reuters, analysts expect Arconic to post revenues of $3.0 billion in 4Q16. Alcoa’s downstream business posted revenues of $3.37 billion in 3Q16. We should remember that it’s the first quarter that Alcoa’s downstream business will report its own results. Arconic’s 4Q16 financial performance might not be strictly comparable to previous periods.

Rolling operations

The difference is mainly due to the inclusion of some of the rolling mills under Alcoa. The GRP segment catered to the fast-growing auto sheet market while also producing commodity-grade can sheet products. The automotive and aerospace sectors (ITA) have been Alcoa’s focus for many quarters. The company competes with peers such as Precision Castparts (BRK-B), Constellium (CSTM), and Woodward (WWD) to capture the demand for aerospace components.

While Arconic retained the auto sheet operations, the commodity-grade sheet operations now form part of Alcoa. According to Alcoa, it’s including the Rolled Products segment into the upstream business because it’s a commoditized business. Also, some of Alcoa’s smelting and rolling capacities are integrated. So, it would have been difficult for the company to separate the assets between two entities.

In the next part, we’ll look at Arconic’s 4Q16 guidance.


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