Can Arconic Get Wall Street’s Support with Its 4Q16 Earnings?



Arconic’s 4Q16 earnings

Arconic (ARNC) is expected to release its 4Q16 earnings on January 31. The company was listed as a separate entity on November 1, 2016, when Alcoa split into two new entities—Alcoa (AA) and Arconic. The split completed the process that was initiated by the company in September 2015. However, the actual seeds of the split were planted almost a decade ago when Alcoa started to expand its value-added portfolio (CSTM) (WWD).

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Price action

While Alcoa saw decent upward price action, Arconic has been on a losing spree since the listing. The basic premise behind Alcoa’s split was to separate the fast-growing value-added business from the legacy commodity business. There definitely is merit to this argument since the markets (SPY) value the cyclical commodity business and engineering business differently. Market participants expected Arconic to command a premium over Alcoa once both companies were listed as separate entities.

When the split was announced in 2015, Arconic was supposed to be the crown jewel that would help drive value for shareholders once it was a separate entity. The commodity business was expected to sag in what looked like a prolonged slowdown in metal prices.

Series overview

However, there have been concerns about the aerospace component industry’s health—Arconic’s key end market. Also, Arconic’s higher leverage ratios haven’t helped matters either. The stock saw negative price action after the split.

Arconic’s 4Q16 earnings would be an opportunity for the company to win over some of Wall Street’s lost love. In this series, we’ll explore analysts’ expectations for Arconic’s 4Q16 earnings. We’ll also look at the company’s 4Q16 guidance. Let’s start by analyzing Arconic’s 4Q16 revenue estimates.


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