Arconic Inc (NYSE: ARNC), global technology, engineering and advanced manufacturing leader stock surged over 11% on 16th July , 2018 (as of 11:38 AM GMT-4; Source: Google finance) after it has signed a new long-term contract with Boeing to supply aluminum sheet and plate for all models produced by Boeing Commercial Airplanes. The multiyear contract, which extends and adds to the companies’ 2014 contract, is the largest to date and captures growth in the build rate increases of the Boeing 737 program.
The new agreement has been signed between two parties for wing skins on all of its metallic structure airplanes and includes polished fuselage skins and wing ribs. In addition, Boeing has awarded ARNC new business for the supply of structural plate used on a variety of other applications, including wing ribs for carbon fiber platforms such as the 787 and 777X. The deal draws on material produced by Arconic’s Very Thick Plate Stretcher (VTPS), which began commercial production last year and is capable of stretching the thickest aluminum plate in the world, used to support composite wings. Further, under this agreement, the companies will also continue to collaborate on new, high-strength and corrosion-resistant alloys, including aluminum-lithium that could be used for complex structural applications. Arconic’s aerospace business, which had revenues totaling more than $5 billion in 2017, holds leading market positions in aerospace sheet and plate produced by its Global Rolled Products (GRP) business and in aerospace forgings, extrusions, jet engine airfoils, structural castings and fastening systems produced by its Engineered Products and Solutions (EP&S) business.
On the other hand, ARNC is is facing a number of operational challenges and the company is a “plausible” takeover candidate, as per Morgan Stanley analyst Rajeev Lalwani, which said in a note after a report that Apollo Global Management LLC and other private-equity investors have expressed interest in a deal. The company’s weak cash generation and attractive valuation give potential buyers “favorable entry and exit points. Meanwhile, ARNC is still working to move past a tumultuous stretch after its 2016 separation from aluminum producer Alcoa Corp. A proxy fight with activist investor Elliott Management Corp., which is its largest shareholder, led to the departure of Klaus Kleinfeld as CEO last year. Separately, an Arconic product known as Reynobond PE was used in the cladding of London’s Grenfell Tower, which caught fire last year, killing at least 80 people.
Meanwhile, Jefferies Reports Initiation of ARNC with the target of $23. Equities researchers at Jefferies gave Buy rating on ARNC stock.