Howmet Aerospace (HWM) AI Stock Analysis

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Howmet Aerospace

(NYSE:HWM)

73Outperform

Howmet Aerospace's strong financial performance and positive earnings call outlook are significant strengths, contributing to a robust overall score. However, the technical indicators suggest potential short-term volatility, and the high valuation may deter value investors. These factors are balanced to arrive at a sound stock score.

Positive Factors

Earnings Outlook

Analyst sees opportunity for more than 20% EPS upside by adjusting OEM target rates, indicating a positive outlook for future earnings.

Financial Performance

Howmet Aerospace reported adjusted EPS of $0.74, beating analyst expectations due to strong operating profit.

Shareholder Value

The company increased its dividend by 25%, demonstrating its commitment to returning value to shareholders.

Negative Factors

Inventory Risk

Plant cautioned the high inventory levels being kept at Boeing do pose some destocking risk for the industry at large.

Operational Challenges

Howmet reportedly may halt orders due to Trump tariffs.

Supply Chain Risk

If Howmet is unable to complete orders, this would cause a blow to the aerospace supply chain.

Howmet Aerospace (HWM) vs. S&P 500 (SPY)

Market Cap

$45.50B

Dividend Yield0.27%

Average Volume (3M)3.15M

Price to Earnings (P/E)39.9

Beta (1Y)1.27

Revenue Growth11.90%

EPS Growth52.65%

CountryUS

Employees23,930

SectorIndustrials

Sector Strength64

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)2.81

Shares Outstanding405,022,520

10 Day Avg. Volume2,760,031

30 Day Avg. Volume3,150,568

Financial Highlights & Ratios

PEG Ratio0.76

Price to Book (P/B)N/A

Price to Sales (P/S)7.13

Price to Cash Flow (P/CF)27.60

P/FCF Ratio22.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$144.67

Price Target Upside26.22% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering17

Howmet Aerospace Business Overview & Revenue Model

Company DescriptionHowmet Aerospace Inc. is a leading global provider of advanced engineered solutions for the aerospace and transportation industries. The company specializes in manufacturing high-performance components and products, including jet engine components, aerospace fastening systems, titanium structural parts, and forged aluminum wheels. Howmet Aerospace operates across several key sectors, including aerospace, defense, and commercial transportation, delivering innovative solutions to enhance performance and efficiency.

How the Company Makes MoneyHowmet Aerospace makes money through the design, manufacture, and sale of its highly specialized products, primarily serving the aerospace and transportation industries. The company's revenue model revolves around producing components for jet engines, aircraft structures, industrial gas turbines, and commercial vehicle wheels. Key revenue streams include contracts with major aerospace manufacturers like Boeing and Airbus, sales to defense contractors, and partnerships with automotive companies. Howmet Aerospace benefits from long-term agreements and recurring sales due to the demand for replacement parts and the high entry barriers in its specialized markets. Additionally, the company invests in research and development to innovate and maintain its competitive edge, further supporting its earnings.

Howmet Aerospace Financial Statement Overview

Summary

Howmet Aerospace has shown notable improvements in profitability and balance sheet stability, with a significant increase in profit margins and cash flow. Despite a decline in revenue, the company's financial strategy has enhanced its resilience and growth potential.

Income Statement

Positive

Howmet Aerospace has demonstrated strong growth in EBIT and net income over recent years, despite a decline in total revenue from 2019 to 2023. The company improved its net profit margin from 3.31% in 2019 to 17.38% in 2023, suggesting enhanced operational efficiency. However, the significant drop in total revenue from 2019 to 2023 remains a concern.

Balance Sheet

Positive

The debt-to-equity ratio has improved significantly, dropping from 1.29 in 2019 to 0.001 in 2023, indicating reduced leverage and improved financial health. The equity ratio has also shown an upward trend, suggesting a stronger equity position. These improvements reflect a stable and strengthening balance sheet.

Cash Flow

Positive

The company has shown a strong positive trend in free cash flow, growing from negative figures in 2019 to a robust $977 million in 2023. The operating cash flow to net income ratio has improved, indicating efficient cash generation relative to net income. This positive cash flow trend underscores the company's ability to generate cash effectively.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
7.43B	6.64B	5.66B	4.97B	5.26B
	Gross Profit
2.31B	1.87B	1.56B	1.38B	1.38B
	EBIT
1.63B	1.20B	919.00M	748.00M	626.00M
	EBITDA
1.84B	1.47B	1.26B	1.09B	831.00M
	Net Income Common Stockholders
1.16B	765.00M	469.00M	258.00M	261.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
564.00M	610.00M	791.00M	720.00M	1.61B
	Total Assets
10.52B	10.43B	10.26B	10.22B	11.45B
	Total Debt
6.00M	3.83B	4.16B	4.23B	5.08B
	Net Debt
-558.00M	3.23B	3.37B	3.51B	3.46B
	Total Liabilities
5.96B	6.39B	6.65B	6.71B	7.87B
	Stockholders Equity
4.55B	4.04B	3.60B	3.51B	3.58B
Cash Flow		Free Cash Flow
977.00M	682.00M	540.00M	250.00M	-258.00M
	Operating Cash Flow
1.30B	901.00M	733.00M	449.00M	9.00M
	Investing Cash Flow
-316.00M	-215.00M	-135.00M	107.00M	271.00M
	Financing Cash Flow
-1.03B	-868.00M	-526.00M	-1.44B	-369.00M

Howmet Aerospace Technical Analysis

Technical Analysis Sentiment

Negative

Last Price114.62

Price Trends

50DMA

128.86

Negative

100DMA

122.39

Negative

200DMA

107.96

Positive

Market Momentum

MACD

1.07

Positive

RSI

52.61

Neutral

STOCH

44.60

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HWM, the sentiment is Negative. The current price of 114.62 is below the 20-day moving average (MA) of 128.12, below the 50-day MA of 128.86, and above the 200-day MA of 107.96, indicating a neutral trend. The MACD of 1.07 indicates Positive momentum. The RSI at 52.61 is Neutral, neither overbought nor oversold. The STOCH value of 44.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HWM.

Howmet Aerospace Risk Analysis

Howmet Aerospace disclosed 28 risk factors in its most recent earnings report. Howmet Aerospace reported the most risks in the “Production” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Howmet Aerospace Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DOV	77 Outperform	$20.76B	7.79	24.30%	1.36%	-2.99%	159.26%
ITW	74 Outperform	$66.17B	19.26	110.24%	2.66%	-1.30%	20.26%
PH	74 Outperform	$66.60B	21.40	25.87%	1.23%	0.41%	19.76%
HWM	73 Outperform	$45.50B	39.94	26.89%	0.27%	11.90%	52.65%
CMI	73 Outperform	$37.97B	9.72	41.27%	2.59%	0.14%	444.36%
OTIS	68 Neutral	$37.66B	23.35	-33.93%	1.64%	0.37%	19.87%
Sector *	62 Neutral	$7.16B	12.21	3.08%	3.43%	3.62%	-14.48%

* Industrials Sector Average

Performance Comparison

HWM

Howmet Aerospace

114.62

48.97

74.59%

CMI

Cummins

267.12

-28.48

-9.63%

DOV

Dover

151.14

-24.31

-13.86%

ITW

Illinois Tool Works

218.41

-38.04

-14.83%

Parker Hannifin

525.48

-30.04

-5.41%

OTIS

Otis Worldwide

90.88

-6.66

-6.83%

Howmet Aerospace Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -10.52% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance, record-breaking results, and strategic improvements in several market segments. However, there were challenges in the commercial transportation and forged wheels segments, which impacted overall performance. Despite these challenges, the company's strong growth, improved leverage, and shareholder returns suggest a positive outlook.

Highlights

Record Financial Performance

Revenues, EBITDA, EBITDA margin, and earnings per share (EPS) reached record levels. Full-year EPS increased by 46% year over year, and free cash flow was a record $977 million.

Strong End Market Performance

Commercial aerospace revenue increased by 20% for the full year, while defense aerospace grew by 22%. The industrial and other market segments were up 9% driven by oil and gas, up 19%.

Leverage and Credit Rating Improvement

Net debt to EBITDA improved to 1.4 times and S&P upgraded Howmet's credit rating to BBB.

Significant Shareholder Returns

Howmet repurchased $500 million of common stock and paid $109 million in dividends in 2024.

Engine Products Segment Growth

Revenue increased 14% year over year, with EBITDA growing 30% to $1.15 billion.

Lowlights

Commercial Transportation Challenges

Revenues in commercial transportation were down 12% in the fourth quarter and 7% for the full year.

Forged Wheels Revenue Decline

Forged wheels revenue decreased 12% year over year, with EBITDA down 7% for the full year.

Company Guidance

During the Howmet Aerospace Fourth Quarter and Full Year 2024 Conference Call, the company reported record results, exceeding guidance with a year-over-year revenue increase of 12% and a 27% growth in EBITDA. Fourth quarter earnings per share rose 40% to $0.74, culminating in a full-year EPS of $2.69, up 46% from 2023. Operating margin for Q4 was 23%, and free cash flow reached a record $977 million, representing an 88% conversion of net income. The company repurchased $500 million in common stock, reduced debt by $365 million, and increased dividends by 25%. The balance sheet was strengthened with a net debt to EBITDA leverage of 1.4 times. Looking ahead, Howmet projects 2025 revenues to grow by 8% with Q1 expectations set at $1.935 billion in revenue and an EPS of $0.76. Free cash flow for 2025 is anticipated to surpass $1 billion.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.