Arconic Shares Rise Nearly 20% on Q1 Earnings and Improved 2021 Outlook

Source: Streetwise Reports   05/04/2021

Arconic Corp. shares rolled to a new 52-week high after the company reported Q1/21 financial results that included a 15% increase in sequential quarterly revenue and raised FY/21 revenue guidance.

Prior to the open of U.S. markets today, aluminum sheet and architectural products firm Arconic Corp. (ARNC:NYSE) announced financial results for the first quarter of 2021 ended March 31, 2021.

The company reported that revenue in Q1/21 increased to $1.7 billion, representing a 15% increase compared to Q4/20 and an increase of 4% over Q1/20. Arconic noted that the higher sequential revenue increase was primarily the result of higher aluminum prices.

The firm stated that Q1/21 adjusted EBITDA decreased by 12% to $179 million, compared to $204 million during Q1/20, but increased 19% by $28 million versus Q4/20. Arconic also noted that the sequential increase was attributed to “its strong operating performance and continued growth in international packaging volumes and strength in industrial markets.”

The firm stated that net income in Q1/21 was $52 million, or $0.46 per share, compared to $46 million, or $0.42 per share in Q1/20.

The company’s CEO Tim Myers commented, “Arconic continued to see increasing customer demand in most of the markets we serve during the first quarter. We captured growth in international packaging due to better than expected regional strength and industrial end markets improved as the trade litigation came to a final positive ruling at the end of March. Ground transportation sales also grew, largely driven by commercial transportation, but were constrained by weather impacts and the semiconductor shortage. Growth in those three end markets and strong operating performance fully offset continued weakness in aerospace sales. Given our strong first quarter performance and improved outlook in both the industrial and packaging markets, we are increasing our full year 2021 revenue and adjusted EBITDA outlook.”

“With the continued reduction of our legacy pension and environmental obligations, and the completion of a $1 billion partial U.S. pension annuitization in April, we believe we are well positioned to focus more fully on future growth opportunities,” CEO Myers added.

Arconic indicated that it is updating its FY/21 business outlook due to the strength it is seeing presently in the industrial and international packaging markets. In addition, the company stated that the final trade case ruling on common alloy aluminum sheet in March along with anticipated improvements in semiconductor chip supplies in H2/21 are also key factors.

The company advised that for FY/21 it expects revenues of $7.1-7.4 billion, compared to its previous guidance of $6.6-6.9 billion. The firm noted that the upwardly revised estimates assume an average full-year LME aluminum price of $2,200/mt and Midwest Premium of $430/mt. The firm indicated that its prior guidance was calculated using a LME price of $2,030/mt and Midwest Premium of $320/mt.

Arconic further advised that for FY/21 it now expects adjusted EBITDA will be in the range of $710-750 million, versus the $675-725 million it estimated previously.

The firm noted that its board of directors approved a new share repurchase program under which the company may repurchase up to $300 million of its outstanding common stock over a two-year period.

The company stated that it has completed about a $1 billion partial annuitization of its U.S. pension obligations. Arconic explained that it “transferred certain plan assets to the insurance company providing the group annuity contract and also made a $250 million contribution to its U.S. pension plans to maintain the funding level of the remaining plan obligations.”

Though the company did not elaborate on the specific details in release, it indicated that it had achieved some significant contract recent wins including securing long-term contracts representing more than $2 billion in aerospace revenue and that it also negotiated agreements over the next three years for around $1.5 billion in North American packaging revenue.

Arconic is based in Pittsburgh, Penn., and is a large producer of aluminum sheet, plate, and extrusions and architectural products. The company manufactures industrial products for use in aerospace, building and construction, ground transportation, industrial and packaging end markets. The firm is organized into three main business unit segments: Rolled Products; Extrusions and Building and Construction Systems.

Arconic started the day with a market cap of around $3.2 billion with approximately 110.0 million shares outstanding and a short interest of about 3.8%. ARNC shares opened 2% higher today at $30.00 (+$0.64, +2.18%) over yesterday’s $29.36 closing price and reached a new 52-week high price this morning of $35.00. The stock has traded today between $29.97 and $35.00 per share and closed at $35.00 (+$5.64, +19.21%).

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