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Howmet Aerospace Inc. (HWM)
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Over the past 2 months, this stock is still in an uptrend! just a natural pullback. 38 soon.
I highly respect ✊ his T/A for both targets and which way you lean bullish or bearish. Thanks!!!
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Howmet Aerospace reached an all time high at 37.06
Arconic Q4 earning was not bad and reaffirms intrinsic valuation in the high 20s whether by EPS or EBITDA multiples in spite of ineffective and dysfunctional senior management. I give Plant the benefit of the doubt because he had back spine and integrity to stand up to Elliott and call off a flawed and corrupt deal and fire Blankenship the inside mole acting on behalf of Elliott and not all the shareholders. Plant decided to do what APO/Elliott were planning to do to make 30+% profit and said everybody should benefit the upside and not just APO and Elliott. The easy path for him, at his age, was to collect his commission on the sale and walk away, like Blankenship, or take the more difficult path of staying on and fight for all shareholders.
Going forward, Plant has to regain investors trust starting by providing much better transparency and communications. The highest priority task for Arconic is to close the 5% margin gap to industry bench mark and NOT the splitting. Splitting the company will not solve the underling margin deficit and nobody will pay market price or any premium for a business running at 5% margin deficit. 2018 over 2017 margins deteriorated meaning the ROI on $770 Mil capex in 2018 was actually negative and the picture for $700 Capex in 2019 is the same based on their guidance. The biggest challenge is the execution of plans. They could not move 50 people to a lower cost headquarter after 2 years of wasted time and money, could not improve margins, could not sell BCS after 7 months of “robust interest”, could not execute any share buyback, and could not come up with a concrete strategy going forward after a whole year of planning. Plant’s CC seemed like they have “some ideas” much short of a company who spent a full year mapping a solid business strategy. I blame Elliott for this shortcoming because they hijacked the process with the “sale” of all the company. I hope Elliott comes around and help the execution of improving margins as oppose to plotting to sabotage to steal the company. I believe Arconic will easily beat the $1.65 EPS, will sell few Billions of asset, will use the proceeds to reduce debt and share counts and hopefully end 2019 in the high 20s to low 30s range. It is all about EXECUTION and we all help them and they should listen and focus on delivering results.
Dear Arconic investors,
We are few weeks from Q4 earning report and 2019 outlook. Investors and employees of Arconic have paid dearly for lack of transparency and accountability by senior management of Arconic since the appointment of Mr. Blankenship
This is our limited chance to make our voices heard by senior management. Please focus of posting ONLY comments related to our demand for transparency and accountability and REFRAIN diluting our message by posting non-related material in the next few weeks. Let’s have few hundred comments all about the same topic hoping to get some traction with management before Q4 report. Here are list of some of questions investors are expecting to hear clear response from Mr. Blankenship in Q4 report:
1- ROI on $750 Mil capex investment, this shows effectiveness of management decision process. Explain, excluding AL price impact, why Y/Y margins deteriorated in 2018/2017?
2- In Q1-2018, Mr. Blankenship promptly cut $200 Mil off of 2018 EPS due to higher AL cost. AL mid-west delivery is $500 less per ton in 2019, relative to Q1-18, which should be $400+ Mil positive impact on EBITDA. Does Blankenship commit to this assessment, if not why?
3- What is status of the $500 Mil share buyback that was announced in Q1-2018? If none was bought back specially during Q3 when shares traded in the $17/18 range, then why?
4- Based on Q3 report, there was “robust interest in the Construction business”. What is the status? Quantify the risk of the London fire. There has to be a clear understanding of the exposure after spending $30 Mil in legal fees associated with that event.
5- Based on improvements in AL prices/ operational efficiencies and opportunistic share buyback, Arconic should forecast about $2.5 EPS and $800+ Mil cash flow, if not why?
6- Why Arconic does not buyout Elliott’s 10% interest and focus on improving the 5% operational margin gaps like other well run companies as oppose to this buyout circus with Elliott and Apollo? What is Elliott’s price point to exit Arconic?
THANK YOU All, hope this attempt works!!
Yahoo Finance Insights
Howmet Aerospace is up 4.91% to 35.50
NEWS STORY JUST HIT A deal that was supposed to be the biggest leveraged buyout of 2018 has been delayed into next year by recent turmoil in the credit markets, The Post has learned.
Billionaire Leon Black’s Apollo Global Management was hoping in December to sign a roughly $20 billion deal to buy Arconic, the New York-based, aluminum-parts maker that mostly serves the aerospace industry, sources close to the talks said.
Worries over liabilities about last year’s Grenfell tower disaster in London had recently complicated negotiations, as an Arconic subsidiary had supplied construction panels that were blamed for the quick spread of the fire that killed 72 people in June 2017.
As reported by The Post, Paul Singer’s Elliott Management, which is spearheading the Arconic sale, has recently agreed to shoulder the Grenfell liabilities despite continued criminal investigations and questions from British politicians about Arconic’s role.
Nevertheless, insiders pointed to the quick and unexpected tightening credit markets for the delayed deal.
“Would you commit to raise $14 billion in this market?” a source said. “There is no market to finance a buyout of that size.”
Indications are that Apollo would move if the markets were to loosen, the source said.
The leveraged loan market is experiencing similar outflows to the S&P 500 index, which has plunged 15 percent since its Sept. 21 apex. Less leverage for buyouts means fewer public companies will be taken private, and those that do will attract lower prices.
“You’ve seen massive retail loan mutual fund outflows,” said the head of capital markets at a large lender, referring to funds run by firms like BlackRock and Franklin Templeton. “The sell-off has been quite dramatic throughout the course of December.”
Next month, banks are planning to syndicate loans for two large completed buyouts — a $6.9 billion buyout of Dun & Bradstreet, and a $13.2 billion buyout of Johnson Controls’ battery business — that closed in November. How they fare will be a bellwether for the leveraged-loan scene, the capital markets boss said.
If Barclays, Credit Suisse and JPMorgan for example, cannot sell their loans to fund the Johnson buyout, or have to sell them well below par, the banks will get slammed with the losses.
“If they go poorly, the whole markets will be re-priced,” the source said. “I think the banks will lose money if they launch (Monday), January 7th.”
Thomson’s Lipper & Wealth Management reports that December’s $9.4 billion in net outflows is the largest since it began tracking loan funds in 2003.
2019 eps now $1.75 to $1.90 a share; at a mkt avg of 15 p/e, thats a target price range of $26.25 to $28.50. According to Fidelity, the industrial sector currently runs an average P/E multiple of 23. If you applied that to ARNC, you get a target price of between $40.25 to $43.70.
Up to 44 we go
Yahoo Finance Insights
Howmet Aerospace is down 4.94% to 33.30
get in before it’s too late
Dear Arconic investors, Please read this:
If the rumor of an imminent Apollo buyout for $22 is true for all except Elliott who will roll his interest into the new privately held company, then just ask yourself a simple following question:
What does Elliott plan to do after the buyout that CANNOT do without the buyout?
The answer is ABSOLUTELY NOTHING. The only motive is substantial discounted stock price at $22 which they know for sure will bring them a 40% return in less than a year when they resell Arconic in whole or in parts at fair market value. If true, there are only three words responsible for one of the most egregious breach of corporate fiduciary responsibilities I know of: BODs, Elliott and Blankenship. I believe BODs will ultimately be held responsible for their betrayal to protect shareholders interest.
Here are the facts Elliott doesn’t want you to know: A $750 mil in 2018 capex and $500 per tone lower 2019 AL delivery price will improve operating margins by at least 3 to 4 % or $400+ Mil more EBITDA for 2019, not to mention the $2 Bil cash on the 2018 balance-sheet which half of it should definitely be used to buyout Elliott’s interest or retire 50 Mil common shares which means about $2.5 EPS for 2019 or mid $30 stock price at 15 times PE multiples. Paul Singer understands these numbers and that is why he is in such a rush to close this deal ASAP. To pull off this obvious corporate heist, he is relying on compromised BODs and uninformed investors with the help from insiders who are either utterly incompetent or co conspirators like Blankenship. Please do not fall for this scam, demand accountability and transparency from BODs. Q4 results and 2019 commitment shall be the last chance to make or break for Blankenship.
It is funny how some people think we should have taken what might have been the most insulting offer to buyout a company in history. They board couldn't approve the sale at this price because there would have been lawsuits up to the wazoo. The price of this stock should already be in the mid 20's and anyone near the deal know this. Earning last quarter were announced BEFORE the buyout offers were made and that brought the stock to 19 and a half. So without a buyout on the table ARNC should be $20-$25 a share. These low ball offers have actually been holding down the price and literally everybody knows it. Sell at this fear level at your own peril. I have been in some stocks that have had some bad days, this is not a bad day for ARNC, it just looks like one. That too will change.
Chairman and CEO John C. Plant acquired 105,000 shares of this lightweight metals company, paying $18.51 per share for a total amount of $1.94 million.
This thing should be trading in the high 20s/close to 30 based on most tangible metrics. It doesn’t make sense, something is artificially depressing the price. Either way I’m holding this till the end.
I am a retired Alcoa/Arconic employee. Part of my compensation involved stock options. I own some at $30.51 that “drop dead” January 26, 2020. I never thought they would be “in the money” but here we are. I really don’t need the additional income in 2019 so I plan on holding off cashing them in until next year. I have a $35 target in mind. Any thoughts on my strategy?
In his annual letter to shareholders on Saturday, Warren Buffet announced a huge $11 billion write-down on Precision Cast Parts, which Berkshire purchased in 2016 for $37 billion. Precision makes parts for the aircraft industry and is a direct competitor with Howmet. Buffet admitted that they greatly overpaid for Precision and have cut 10,000 employees as part of a restructuring of the company as they anticipate lower demand for aircraft parts going forward.
Any opinions out there on what impact, if any, the problems facing Precision will have on Howmet? I don't recall hearing about massive job cuts at Howmet, so does that mean that they have somehow weathered the downturn in the airline industry better than Precision? Also, what percentage of Howmet's revenue comes from the manufacture of aircraft parts? Have their other businesses effectively cushioned the impact from the downturn in the commercial airline industry? Is Howmet a major player in the defense industry?
Many companies who have eliminated business travel during the pandemic and have resorted to meeting via Zoom and other platforms have indicated that they plan to significantly cut business travel in the future after the pandemic ends to save money. Business travel is one of the most profitable business segment for the airlines. This does not bode well for the profitability of the airlines going forward, which potentially translates into fewer purchases of new planes, which potentially means lower sales for Howmet.
If my analysis is wrong, I would appreciate the opinions of others on this board.
Arconic upgraded to Buy from Neutral at Longbow...
Nice solid beat across the board - all metrics continue to move upward.
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