Argus Turns Neutral On Arconic Amid 'Challenging Outlook'

With Arconic Inc ARNC shares down by around 40 percent since their peak of more than $30 per share in January, Argus dropped its bullish stance on the stock Thursday. 

The Analyst

Argus analysts John Eade and Emily Sayles downgraded Arconic from Buy to Hold.

The Thesis

All three of Arconic's business segments — global rolled products, engineered products and solutions and transportation and construction solutions — are facing challenges from the rising price of aluminum, the analysts said in the downgrade note.

Other risks to Arconic's business include its direct correlation to the health of the global industry economy, along with foreign exchange rates, the cost of energy and raw materials and end market trends in segments Arconic serves, according to Argus.

Arconic also faces company-specific problems, including what role its products played in the fire at London's Grenfell Tower, the analysts said. Arconic's cladding products were used in the high-rise tower, where a fire resulted in the death of 80 people, but its cladding products are only designed for use in low-rise buildings, Eade and Sayles said.

Regardless of the outcome of a public inquiry, the company is receiving "unfavorable" and daily press coverage, the analysts said. 

Arconic's stock chart paints a concerning picture, as the 50-day moving average recently dipped below the 200-day moving average, Eade and Sayles said.

A bullish stance could be justified once again if the company shows signs of stabilizing its margins, according to Argus. 

Price Action

Arconic shares were down 2.4 percent at the time of publication Thursday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For May 31, 2018

5 Arconic Catalysts Driving Longbow's Bullish Stance

Photo courtesy of Arconic.