Addition to the portfolio: ARNC (Arconic Corp)

Another addition to my portfolio: ARNC (Arconic Corp)

Arconic Corporation manufactures and sells aluminum sheets, plates, extrusions, and architectural products in the United States, Hungary, Russia, China, France, the United Kingdom, and internationally. It operates through three segments: Rolled Products, Extrusions, and Building and Construction Systems.

ARNC stock price has been recovering nicely since COVID crash and keeps staying above MA50 line. Most recently it has been building a bull flag, seems to be ready to move.

There are currently 3 analysts providing rating for ARNC. All of them give a 'Buy' rating. The highest price target is $43 and the lowest is $32 providing for an average target price of $36.33.

Source: https://www.marketwatch.com/investing/stock/arnc/analystestimates?mod=mw_quote_tab

Analysts are predicting a quick growth in revenues and earnings over the next 2 years for ARNC.

Growth in revenue and earnings is expected to result in EPS of ~$2.789 by the end of 2022.

Currently, ARNC is good value based on its PE Ratio (19x) compared to the US Metals and Mining industry average (21x). However, if we apply the same PE ratio of ~20 to future EPS the target price for 2022 would be ~$56. This represents 89% upside potential for ARNC stock price.

(for reference: EPS for end of 2021 is expected to hit $1.9. At P/E ratio of 20 this provides a target price of $38.

Source: https://simplywall.st/stocks/us/materials/nyse-arnc/arconic

On a positive note ARNC has started to recover from the declining sales as it reported Q3 revenue of $1.4 billion, up 19% from the prior quarter due to strength in automotive end-market volumes which recovered fully from the second quarter and exceeded third quarter 2019 levels. The Company reported net income of $5 million, or $0.05 per share, in third quarter 2020 compared with a net loss of $24 million, or $0.22 per share, in third quarter 2019.

Source: https://www.arconic.com/financial-release/2020-11-05/arconic-reports-third-quarter-2020-results/

Risks:

The main risks for the company: continued lockdowns and emergence of new virus strains that cannot be stopped by currently available vaccines. But this is a risk for all companies. The company is quite diversified country-wise, so it is likely going to benefit from some countries recovering faster than others.

Company-specific risk is the price of aluminum.