Arconic (NYSE:ARNC), in the news in recent weeks due to buyout rumors, reported second-quarter results last week that came in ahead of (reduced) expectations, and it provided some details about its planned restructuring.

The company has been a disappointment ever since it was spun out of Alcoa in late 2016, but it has a new management team in place working aggressively to get operations up to snuff. Given Arconic had been among the worst-performing U.S. stocks in 2018 prior to the acquisition speculation, there's an opportunity for significant upside should leadership get the company on track.

Here's a look at where Arconic stands post-earnings.

3D printed aero engine vanes

3D-printed aero engine vanes, manufactured at Arconic's Whitehall, Michigan, facility. Image source: Arconic.

Some progress in the quarter

Arconic on July 31 reported quarterly results that beat expectations -- no small feat given the stock declines that have followed recent earnings releases. The company reported second-quarter adjusted earnings per share of $0.37, $0.08 above consensus estimates, on revenue that came in 2.4% above expectations.

It also reaffirmed its full-year guidance for revenue of $13.7 billion to $14 billion and earnings per share between $1.17 and $1.27. Prior to the call, analysts had been predicting $1.23 per share in earnings on $13.8 billion in revenue for the year. Results for the year are expected to be tempered by aluminum's 9.2% rise over the last 12 months, as Arconic forecasts additional increases for the rest of 2018.

The company has been plagued by operational issues that have caused it to fall behind on key projects, and CEO Chip Blankenship, who took over in January, has warned additional spending will be necessary to clear up issues and revamp production. Arconic said in its earnings release it would spend more than $100 million to expand facilities in Michigan and Tennessee to meet higher demand for engine parts.

Arconic management didn't specifically say whether it has caught up on perhaps its most pivotal program, supplying components for CFM International's hot-selling LEAP turbofan jet engine. On the investor call following the earnings release, Blankenship said only that Arconic is holding "daily prioritization and production meetings with each of our engine customers" and "supporting their needs." CFM said last month that it was four to five weeks behind schedule on LEAP production, due largely to supply chain issues, but said the gap was narrowing.

New CEO making his mark

In addition to announcing earnings, Arconic said it would sell its building and construction systems unit, which makes facades, windows, and framing products and is worth $1 billion in sales. BCS is responsible for one of Arconic's setbacks in 2017, as it was the unit that made the aluminum panels involved in the deadly Grenfell Tower fire in London.

The BCS decision is the first result of a strategic review initiated by Blankenship earlier this year. Arconic said it has reviewed 25 product lines across a number of criteria and is now running each unit through a deeper, "phase 2" assessment. While management provided no specifics on other potential divestitures, I expect other assets to be listed for sale, perhaps as soon as November, during an investor day scheduled for that month, as the review plays out and Arconic refines its focus around products for the aerospace and automotive industries.

Blankenship used the call to outline a series of steps he is implementing to try to improve Arconic's operations. He's created a centralized organization at headquarters charged with training and advising plants on lean manufacturing concepts, as well as a surge team to help local managers who require assistance. Arconic is also investing in smart manufacturing, including sensors and data collection to analyze equipment usage, in hopes of improving uptime and production output while reducing costs.

The CEO said that in cases where surge teams have been deployed, Arconic has increased output by more than 10%. There is also a new vice-president-level position to oversee the effort. And Arconic this month will hold its first internal plant manager summit to try to create a unified strategy throughout the business and teach best practices.

Arconic was created inside Alcoa via a series of acquisitions that occurred earlier in the decade, and it's a head-scratcher that this integration work wasn't done years ago. But the important thing for current investors is that, under Blankenship, it's finally happening now. Change won't come overnight, but my impression is there is a lot of low-hanging fruit to be harvested for Arconic to simply become an average manufacturer.

Bet on the turnaround

That relatively straightforward restructuring has attracted private equity interest in Arconic. I said last month the best option for investors wouldn't be a quick payout from an acquisition, but rather holding the shares and enjoying the upside if Blankenship's work goes as planned. Following the second-quarter results and call, I'm even more confident in my initial assessment.

Even after the 10% spike on buyout rumors, Arconic trades at just 16 times forward earnings, a 25% discount to the multiple investors gave it soon after the split from Alcoa and before the markets realized how troubled the company's operations were. The company's shares are still down more than 20% year to date.

ARNC Chart

ARNC data by YCharts.

I believe Arconic under Blankenship is moving in the right direction, and that over the next 12 to 18 months the company could be worth significantly more than the $25 per share price range rumored in reports of buyout talks. There's obviously risk to any restructuring, but the real question now is whether it will be shareholders or a private equity owner who will ultimately enjoy the upside -- assuming, of course, that Arconic's operations improve.

Editor's note: A previous version of this article misidentified CEO Blankenship as "Chris" instead of Chip. The Fool regrets the error.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.