CENX - Free Post Earnings Research Report: Arconic's Revenues Grew 8%; Adjusted EPS Climbed 3%
Stock Monitor: Century Aluminum Post Earnings Reporting
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Earnings Highlights and Summary
For the first quarter of the fiscal year 2018, Arconic reported revenues of $3.45 billion, up 8% compared to $3.19 billion in Q1 2017. The Company's organic revenues were up 4% on a y-o-y basis, driven by higher volumes in the aerospace engines, automotive, commercial transportation, building and construction, industrial, and defense markets. The Company's revenue numbers exceeded analysts' estimates of $3.33 billion.
During Q1 2018, Arconic's operating income was $333 million, up 18% on a y-o-y basis. The Company's operating income, excluding special items, was $345 million, down 12% on a y-o-y basis, as the unfavorable impacts of higher aluminum prices; performance shortfalls in the Company's Rings, Disks, and Global Rolled Products operations; unfavorable aerospace wide-body production mix; and the inventory impact of the new pension accounting standard more than offset volume gains and net cost savings.
For Q1 2018, Arconic's net income was $143 million, or $0.29 per share. These results include $26 million in special items, principally due to costs associated with the early redemption of debt and restructuring-related charges. The Company's net income was $322 million, or $0.65 per share, in Q1 2017.
Arconic's net income, excluding special items, was $169 million, or $0.34 per share, versus $169 million, or $0.33 per share, in Q1 2017. The Company's earnings beat Wall Street's estimates of $0.32 per share.
Segment Performance
During Q1 2018, Arconic's Engineered Products and Solutions (EP&S) segment's revenues grew 4% to $1.5 billion on a y-o-y basis. The Company's organic revenues gained 2% on y-o-y basis as volume growth in aerospace engines, defense, and industrial more than offset the continued downturn in the industrial gas turbine market and headwinds in aerospace airframe production mix. For Q1 2018, the segment's operating profit was $221 million, down 11% on a y-o-y basis, as performance shortfalls in Rings and Disks, unfavorable product mix, and higher input costs more than offset the strength in aerospace engines. The segment's operating margin was 14.3%, down 230 basis points (bps) compared to the year ago same period.
For Q1 2018, Arconic's Global Rolled Products (GRP) segment's revenues jumped 9% to $1.37 billion on a y-o-y basis. The segment's operating profit was $112 million, down 18% on a y-o-y basis, driven by higher aluminum prices and an unfavorable aerospace wide-body production mix. The segment's operating margin was 8.2%, down 270 bps versus the year ago comparable period, including a 170-bps negative impact of higher aluminum prices.
During Q1 2018, Arconic's Transportation and Construction Solutions (TCS) segment's revenues advanced 18% to $537 million on a y-o-y basis. The segment's operating profit was $67 million, down 1% on a y-o-y basis, as higher volume in commercial transportation and building & construction, favorable foreign currency movements, and net cost savings were more than offset by headwinds that included higher aluminum prices and unfavorable product price and mix. The segment's operating margin was 12.5%, down 240 bps from the year ago corresponding period, including a 350-bps negative impact of higher aluminum prices.
Cash Matters
Arconic ended Q1 2018 with cash on hand of $1.2 billion. The Company's cash used for operations was $436 million, driven by the normal first quarter build in working capital and semi-annual interest payments, as well as higher pension contributions. For Q1 2018, Arconic's free cash flow was negative $417 million, which included $124 million of incremental pension contributions compared to the year ago same period.
Arconic reduced its pension liability by $315 million in Q1 2018, driven by cash contributions and because of its decision to freeze US defined benefit pension plans for all US-based salaried and non-bargained hourly employees.
Outlook
Arconic updated its full year FY18 earnings per share (EPS) guidance from the midpoint of $1.50 to the range of $1.17 to $1.27. The impact of higher aluminum prices, including scrap rates and the trading desk, is $0.19 from the Company's initial guidance. Arconic also reduced its cash flow guidance to $250 million for FY18, down from $500 million.
Stock Performance Snapshot
May 23, 2018 - At Wednesday's closing bell, Arconic's stock marginally climbed 0.38%, ending the trading session at $18.64.
Volume traded for the day: 4.43 million shares.
After yesterday's close, Arconic's market cap was at $9.03 billion.
The stock has a dividend yield of 1.29%.
The stock is part of the Basic Materials sector, categorized under the Aluminum industry.
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