Arconic (NYSE: ARNC) and Elbit Systems (NASDAQ:ESLT) are both mid-cap basic materials companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, dividends, risk, earnings, analyst recommendations, valuation and institutional ownership.

Earnings and Valuation

This table compares Arconic and Elbit Systems’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arconic $12.39 billion 0.95 -$941.00 million ($1.59) -15.39
Elbit Systems $3.26 billion 1.77 $236.90 million $5.54 24.40

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

Dividends

Arconic pays an annual dividend of $0.24 per share and has a dividend yield of 1.0%. Elbit Systems pays an annual dividend of $1.76 per share and has a dividend yield of 1.3%. Arconic pays out -15.1% of its earnings in the form of a dividend. Elbit Systems pays out 31.8% 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.

Volatility and Risk

Arconic has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500. Comparatively, Elbit Systems has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Arconic and Elbit Systems, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arconic 0 2 4 0 2.67
Elbit Systems 0 2 0 0 2.00

Arconic currently has a consensus price target of $29.17, suggesting a potential upside of 19.19%. Elbit Systems has a consensus price target of $110.00, suggesting a potential downside of 18.64%. Given Arconic’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Arconic is more favorable than Elbit Systems.

Institutional & Insider Ownership

74.7% of Arconic shares are owned by institutional investors. Comparatively, 11.2% of Elbit Systems shares are owned by institutional investors. 0.1% of Arconic shares are owned by insiders. Comparatively, 0.8% of Elbit Systems shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Arconic and Elbit Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arconic -4.70% 9.71% 2.73%
Elbit Systems 7.13% 16.32% 5.88%

About Arconic

Arconic Inc., formerly Alcoa Inc., is engaged in lightweight metals engineering and manufacturing. The Company operates through three segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. Its multi-material products, which include aluminum, titanium and nickel, are used around the world in markets, such as aerospace, automotive, commercial transportation and packaging. The Global Rolled Products segment produces a range of aluminum sheet and plate products for the aerospace, automotive, commercial transportation, brazing and industrial markets. The Engineered Products and Solutions segment develops and manufactures products for the aerospace (commercial and defense), commercial transportation and power generation end markets. The Transportation and Construction Solutions segment produces products that are used in the non-residential building and construction and commercial transportation end markets.

About Elbit Systems

Elbit Systems Ltd. is an international technology company engaged in a range of programs across the world. The Company develops and supplies a portfolio of airborne, land and naval systems and products for defense, homeland security and commercial aviation applications. Its systems and products are installed on new platforms, and it also performs platform modernization programs. In addition, it provides a range of support services. The Company’s activities include military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aerostructures; unmanned aircraft and unmanned surface vessels; land vehicle systems; command, control, communications, computer and intelligence (C4I) systems; intelligence and cyber systems; electro-optic and countermeasures systems; electronic warfare and signal intelligence systems, and various commercial activities. It operates primarily in the defense and homeland security arenas.

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