Editor's Note

There is an art and a science to manufacturing precision aluminum components. Arconic, formerly Alcoa Inc, has mastered them both.



NEW BULLISH Plays

ARNC - Arconic Inc - Company Profile

Arconic creates breakthrough products that shape industries. Working in close partnership with our customers, we solve complex engineering challenges to transform the way we fly, drive, build and power. Through the ingenuity of our people and cutting-edge advanced manufacturing techniques, we deliver these products at a quality and efficiency that ensure customer success and shareholder value. Arconic Inc develops and manufactures engineered products and solutions for the aerospace, industrial gas turbine, commercial transportation and oil and gas markets. (description from company release)

For Q2, Arconic reported earnings of 32 cents that beat estimates for 27 cents. Revenue of $3.261 billion beat estimates for $3.233 billion. Since the breakup of Alcoa, Arconic has been focused on reducing costs, reducing debt and expanding their product line. They guided for the full year for revenues of $12.3-$12.7 billion, up from prior guidance at $11.8-$12.4 billion. Earnings guidance was raised to $1.15-$1.20, up from $1.10-$1.20. They ended the quarter with $1.8 billion in cash. They declared a 6-cent quarterly dividend payable August 25th to holders on August 4th.

Expected earnings Oct 24th.

After the breakup of Alcoa, Arconic saw their share price double because this was the high tech portion of the business. They make complex aluminum components for airplanes, aerospace, autos and just about everything that needs a high performance, lightweight component. After the big ramp higher they traded sideways for three months along with the market, Shares declined sharply after the high rise fire in England because one of their components was used in the cladding that had recently been added to the building. Investors did not know if Arconic had any liability risk. The answer is probably not.

The contractor on the building combined multiple components in an unsafe manner to cover the outside of the building. It was not an Arconic component that failed and their products conformed to all the building codes. Once that was established shares began to rise again in late June.

Shares closed at $25 on Monday and resistance is $28. They reported earnings before the bell and after a pre-market spike they traded flat for the day with an uptick at the close. I am going to put an entry trigger on this position just in case there is a delayed reaction to the earnings.

With an ARNC trade at $25.35

Buy ARNC shares, initial stop loss $23.85.
Alternate position: Buy Oct $27 call, currently $1.05. Initial stop loss $23.85.


Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 at the market open.


NEW BEARISH Plays

No New Bearish Plays