Arconic falls after margins disappoint, Grenfell tragedy discussed

Shares of Arconic (ARNC) are falling after the specialty engineered aluminum maker reported quarterly financial results earlier today. Arconic was spun-off from Alcoa (AA) in 2016 and is in midst of furthering its share in the engineered aluminum space. EARNING'S CONCERNS: Despite posting second quarter results that that exceeded estimates on the top and bottom lines, the company's stock is lower. Arconic reported earnings per share of 32c on revenue of $3.3B. Analysts had expected EPS of 26c on revenue of $3.18B. Weighing on shares today is the revenue decline in its industrial gas turbine segment "due to continued softening in those markets" and pressure on its Engineered Products and Solutions, or EP&S, unit. EP&S's Q2 adjusted EBITDA margin was down 1.6% to 20.9%. Speaking on its earnings call earlier, CFO Kenneth Giacobbe cited ramp up costs in new aircraft platforms. "As I mentioned, ramp up cost in the quarter were $9M year-over-year, unfavorable. Sequentially, ramp up costs are down in both absolute dollars and as a percent of aero engine revenue. Ramp up cost in the second half of 2017 are expected to continue to stabilize and decline as a percentage of aero revenues as we continue to work down the learning curve on a large number of new product introductions," Giacobbe explained. Looking ahead, the company raised its full year 2017 EPS view to $1.15 - $1.20 from its prior view of $1.10-$1.20. Analysts were expecting FY17 EPS of $1.16. GRENFELL TOWER TRAGEDY: Additionally, the company announced that it was exiting the global Reynobond PE market after the tragic and deadly Grenfell Tower fire. Arconic made the layers of aluminum for the construction of the facade that was installed last year on the highrise. On its quarterly earnings call the company added that its total 2016 Reynobond PE global revenue for building applications was less than $60M and a fraction of that ends up in high-rise applications. Of the $60M in revenue, approximately $3M was Reynobond PE sales into the U.K. ACTIVIST FUND ELLIOTT: Arconic has been in a tumultuous struggle with activist hedge fund Elliott Management, who has been calling for broad change at the industrial parts maker. Arconic CEO Klaus Kleinfeld stepped down in April due to Elliott's accusations that Kleinfeld threatened a senior Elliott executive. In a statement from April, Elliott said the Kleinfeld letter "read as a threat to intimidate or extort a senior officer of Elliott Management based on completely false insinuations, a threat that we took seriously and about which we immediately and privately informed the Board." Subsequently in late May Arconic announced a resolution with Elliott agreeing to certain concessions. PRICE ACTION: In afternoon trading, shares of Arconic are down almost 1% to $25.05.