5 Arconic Catalysts Driving Longbow's Bullish Stance

Arconic Inc ARNC is a stock that's "bruised" trading south of $18 per share, but to say it's "broken" stock is a mistake, according to Longbow Research. 

The Analyst

Longbow Research's Chris Olin upgraded Arconic from Neutral to Buy with a new $23 price target.

The Thesis

The $18 level represents a "good entry point" for a stock with high exposure to the aerospace industry, Olin said in the upgrade note.

The company faces five potential catalysts in the coming years that could drive EPS growth, the analyst said:

• Expectations that Boeing will confirm a 737 build rate increase to 60 to 62 units per month.
• Wide-body aircraft demand should move higher by 2020-2021.
• Aluminum prices could start falling as sanction threats from the U.S. government against Rusal could be removed.
• The Firth-Rixson business could regain lost revenue opportunities after solving operational challenges.
• Management could "tap into" the $500-million share repurchase authorization program.

Arconic's headwinds in the first half of 2018 are likely short-term in nature and problems the new management team can fix, Olin said. The Street's reset estimates for Arconic could start moving higher as the company focuses on margin expansion opportunities for 2019 and 2020 he said.

The ongoing activist shareholder "influence" from Elliott Management "cannot be overlooked," as it could prompt a portfolio break-up and/or M&A activity, according to Longbow. 

Price Action

Shares of Arconic were higher by 1.85 percent at the time of publication Wednesday. 

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