UPDATE: Arconic (ARNC) Tops Q4 EPS by 3c, Revenues Beat; FY19 EPS/Revenue Mid-Point Views Above Consensus & Announces Spin-Off, Potential Sale of Non-Core Units, Expects Dividend Cut

(Updated - February 8, 2019 8:15 AM EST: Added Strategy & Portfolio Review Details)

Arconic (NYSE: ARNC) reported Q4 EPS of $0.33, $0.03 better than the analyst estimate of $0.30. Revenue for the quarter came in at $3.5 billion versus the consensus estimate of $3.42 billion.

• Revenue of $3.5 billion, up 6% year over year; organic revenue1 up 10% year over year
• Net income of $218 million, or $0.44 per share, versus net loss of $727 million, or $1.51 per share, in 4Q 2017
• Net income excluding special items of $162 million, or $0.33 per share, versus $152 million, or $0.31 per share, in 4Q 2017
• In the fourth quarter, cash provided from operations of $426 million, cash used for financing activities of $40 million, and cash provided from investing activities of $354 million
• Adjusted Free Cash Flow in the fourth quarter was $478 million

Arconic Chairman and Chief Executive Officer John Plant said, “Having been a Director of Arconic since 2016 and Chairman of the Board since 2017, I have a historical perspective of the Company and understand what we can achieve. I am pleased to lead Arconic to reach that potential.” Mr. Plant added, “In 2018, Arconic delivered solid revenue growth and improved operational performance. With Elmer Doty as President and Chief Operating Officer, I am focused on further enhancing our operations and charting a new strategic direction to deliver value for shareholders.”

Mr. Plant continued, “After a rigorous and comprehensive process, we did not receive a proposal for a full-company transaction that we believe was in the best interests of our shareholders. The Board sees more shareholder value creation through a restructuring of the Company. As part of the strategy and portfolio review, we have determined to separate the portfolio into Engineered Products & Forgings and Global Rolled Products. In addition, we will also explore the potential sale of businesses that do not best fit into Engineered Products & Forgings and Global Rolled Products.”

Mr. Plant added, “Our team improved quality and delivery to customers in the face of increasing demand and record level shipment volumes in some segments. Our continuous improvement efforts are gaining traction. Furthermore, we have commenced plans to reduce operating costs by approximately $200 million on an annual run-rate basis.”

Strategy and Portfolio Review

Strategy and Portfolio Review

The Company commenced plans to reduce operating costs by approximately $200 million on an annual run-rate basis. The program is designed to maximize the impact in 2019.

Arconic also announced as part of its strategy and portfolio review that it will separate into Engineered Products & Forgings and Global Rolled Products, with a spin-off of one of the businesses. In addition, it will also explore the potential sale of businesses that do not best fit into Engineered Products & Forgings or Global Rolled Products.

The Company also intends to execute its previously authorized $500 million share repurchase program in the first half of 2019. The Board has also authorized an additional $500 million of share repurchases, effective through the end of 2020.

Arconic expects to reduce its quarterly common stock dividend from $0.06 to $0.02 per share.

John C. Plant Named Chairman and Chief Executive Officer, Elmer L. Doty Named President and Chief Operating Officer

GUIDANCE:

Arconic sees FY2019 EPS of $1.55-$1.65, versus the consensus of $1.58. Arconic sees FY2019 revenue of $14.3-14.6 billion, versus the consensus of $14.43 billion.

For earnings history and earnings-related data on Arconic (ARNC) click here.

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