Why Arconic Stock Just Popped 10%

Investors get swept up in the excitement of earnings season.

Rich Smith
Rich Smith
Feb 1, 2017 at 2:12PM
Close-up of Arconic aero engine blades

Image source: Arconic.

What happened

Shares of value-added aluminum manufacturer Arconic (NYSE:ARNC) are up 10% as of 2:08 p.m. EST Wednesday following the release of its Tuesday earnings report.

So what

Analysts had been expecting the Alcoa spinoff to report $0.23 per share in pro forma profit on $3 billion in revenue in its fiscal fourth-quarter 2016 report last night. Management hit that revenue total on the head, reporting $3 billion in Q4 sales.

As for the profit, though, well, Arconic actually reported a $2.88-per-share loss for the quarter. Management blamed special items related to its just-sundered relationship with Alcoa for the entirety of that loss, however, and argued that "excluding special items, adjusted income from continuing operations" would have been "$0.12 per share."

Of course, even if you take those pro forma numbers at face value, they still suggest Arconic missed Wall Street estimates by nearly 50% -- but investors don't seem to mind, and are bidding up Arconic stock regardless.

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Now what

Why might that be? You might think it was the guidance -- but you'd be wrong there as well.

In conjunction with its earnings (read "losses") announcement, Arconic issued new guidance for 2017 predicting it will take in between $11.8 billion and $12.4 billion in revenue and earn pro forma profits of between $1.10 and $1.20 per share. Problem is, these numbers also fall short of Wall Street expectations, which had been looking for revenue of $12.55 billion, and pro forma profits of $1.33 per share.

Long story short, aside from the uncertain prospect of a new CEO coming in and righting the ship (activist investor Elliott Management is pushing for a management overhaul), there's little reason for Arconic shares to be soaring as they are today. Now might be a good time for investors to take some profits off the table.