Arconic (ARNC -7%) is trading lower after strong fourth quarter results were offset by lower than expected free cash flow and earnings guidance for 2018.
Fourth quarter revenue was up 10% to $4.3 billion. Engineered Products and Solutions revenue was up 6% to $1.5 billion, Global Rolled Products revenue was up 15% to $1.2 billion and Transportation and Construction Services revenue was up 14% to $518 million. Total organic sales grew 6%, up from 5% in the third quarter.
Guidance for fiscal 2018 was mixed. Revenue of $13.4-13.7 billion (+4.6% at midpoint) was above estimates but adjusted earnings of $1.45-1.55/share and free cash flow of $500 million were below estimates.
Also of note, Chip Blankenship, who officially joined the Company on January 15, has initiated a review of Arconic's strategy and portfolio. The Company expects to complete this review by the end of the year. This could result in additional divestments or separations down the road. On the call, management said it would take a thoughtful approach to unlock the company's potential. Recall Arconic separated from upstream aluminum maker Alcoa (AA) in late 2016.
Arconic also announced that it will relocate its global headquarters in 2018 out of New York City to a more cost-effective location.
To further enhance the Company's financial position and return capital to shareholders, Arconic's Board of Directors has authorized a share repurchase program of up to $500 million of stock (almost 4% of shares outstanding) and a $500 million early debt reduction.
The $13 billion company trades at ~18x earnings.
The stock is testing the 50-day moving average and prior support near the $27 area this morning.