Head to Head Review: Arconic (ARNC) and Kaiser Aluminum (KALU)

Arconic (NYSE: ARNC) and Kaiser Aluminum (NASDAQ:KALU) are both basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Profitability

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This table compares Arconic and Kaiser Aluminum’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arconic -0.57% 11.29% 3.20%
Kaiser Aluminum 3.25% 11.35% 6.27%

Institutional and Insider Ownership

80.5% of Arconic shares are owned by institutional investors. 0.1% of Arconic shares are owned by insiders. Comparatively, 3.0% of Kaiser Aluminum shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk & Volatility

Arconic has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500. Comparatively, Kaiser Aluminum has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.

Dividends

Arconic pays an annual dividend of $0.24 per share and has a dividend yield of 1.1%. Kaiser Aluminum pays an annual dividend of $2.20 per share and has a dividend yield of 2.2%. Arconic pays out 19.7% of its earnings in the form of a dividend. Kaiser Aluminum pays out 43.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Earnings & Valuation

This table compares Arconic and Kaiser Aluminum’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arconic $12.96 billion 0.84 -$74.00 million $1.22 18.48
Kaiser Aluminum $1.40 billion 1.21 $45.40 million $5.09 19.90

Kaiser Aluminum has lower revenue, but higher earnings than Arconic. Arconic is trading at a lower price-to-earnings ratio than Kaiser Aluminum, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and price targets for Arconic and Kaiser Aluminum, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arconic 0 4 5 0 2.56
Kaiser Aluminum 1 5 0 0 1.83

Arconic presently has a consensus price target of $29.78, indicating a potential upside of 32.11%. Kaiser Aluminum has a consensus price target of $101.50, indicating a potential upside of 0.21%. Given Arconic’s stronger consensus rating and higher possible upside, research analysts clearly believe Arconic is more favorable than Kaiser Aluminum.

Summary

Kaiser Aluminum beats Arconic on 9 of the 16 factors compared between the two stocks.

About Arconic

Arconic Inc. engineers, manufactures, and sells lightweight metals of aluminum, titanium, and nickel worldwide. It operates through three segments: Engineered Products and Solutions, Global Rolled Products, and Transportation and Construction Solutions. The Engineered Products and Solutions produces and sells fastening systems and seamless rolled rings; investment castings, including airfoils and forged jet engine components; and extruded, machined, and formed aircraft parts, as well as various forged, extruded, and machined metal products. This segment serves commercial and defense aerospace, commercial transportation, and power generation end markets. The Global Rolled Products segment produces and sells aluminum sheets and plates; and aseptic foils. This segment serves commercial and defense aerospace, commercial transportation, and power generation end markets. The Transportation and Construction Solutions segment produces and sells integrated aluminum structural systems, architectural extrusions, and forged aluminum commercial vehicle wheels, as well as aluminum products for the industrial products end market. This segment serves nonresidential building and construction, and commercial transportation end markets. The company sells its products directly to customers and through distributors. Arconic Inc. was founded in 2016 and is based in New York, New York.

About Kaiser Aluminum

Kaiser Aluminum Corporation manufactures and sells semi-fabricated specialty aluminum mill products. The company offers rolled, extruded, and drawn aluminum products used principally for aerospace and defense, automotive, consumer durables, electronics, electrical, and machinery and equipment applications. Its aerospace and high strength products include heat treat plates and sheets, hard alloy extruded shapes, cold finish rods and bars, seamless drawn tubes, and billets for aerospace and defense industries. The company's automotive extrusions include extruded aluminum products for structural components, bumper systems, anti-lock braking systems, and drawn tubes for drive shafts in the automobile industry. Its general engineering products comprise alloy plate, sheet, rod, bar, tube, wire, and standard extrusion shapes used in various applications, including the production of military vehicles, ordnances, semiconductor manufacturing cells, electronic devices, after-market motor sport parts, tooling plates, parts for machinery and equipment, bolts, screws, nails, and rivets. The company also offers extruded, drawn, and cast billet aluminum products for industrial end uses. It sells its products directly to customers through sales personnel located in the United States, Canada, Europe, and China, as well as through independent sales agents in other regions of Asia, Latin America, and the Middle East. Kaiser Aluminum Corporation was founded in 1946 and is headquartered in Foothill Ranch, California.

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