Key Takeaways HWM's costs rose 6.1% in Q2 2025, driven by input costs and higher headcount.Adjusted EBITDA margin hit 28.7% in Q2, up 300 basis points year over year.HWM raised 2025 margin outlook to 28.5-28.6% from the prior 27.8-28.2% range.Howmet Aerospace Inc. (HWM) has been grappling with rising costs and expenses over time. HWM reported an uptick in costs and expenses during the second quarter of 2025. The company’s cost of sales rose 6.1% year over year in the quarter due to increasing input costs an ...

Question-and-Answer SessionJohn, you've done a fabulous job when it comes to Howmet. There was one interesting contrast in the second quarter results, where many suppliers, including yourself, saw an inventory destocking, but Howmet's commercial OE business still grew low single digits unlike many. So in large part because of the actions you've taken over the past year, are you seeing any sense of shift from your OEM customers? And how do you think you're keeping -- how are you thinking about supply chain l ...

Key Takeaways Commercial aerospace drove 52% of Howmet's Q2 2025 revenues, rising 8% year over year.Airlines' push for fuel-efficient aircraft boosts demand for Howmet's advanced components.Boeing's 737 MAX recovery and Airbus A320/321 build rates support Howmet's growth.Howmet Aerospace Inc. (HWM) is benefiting from strong momentum in the commercial aerospace market, which remains its key growth driver. In the second quarter of 2025, the commercial aerospace market contributed more than half of the company ...

Howmet Aerospace (HWM) 2025 Conference September 04, 2025 09:30 AM ET Company ParticipantsSheila Kahyaoglu - Aerospace & Defense & Airlines Equity ResearchJohn Plant - Chairman & CEOSheila KahyaogluBarbie or something like that.John PlantShe's crazy.Sheila KahyaogluYou only knew what he was referring to. Good morning, everyone. My name is Sheila Kayallo with the Jefferies Aerospace and Defense Equity Research Team. So thank you, Haumet, for being here. John Plant, in case you don't know, chairman and CEO.Ke ...

Group 1: Company Performance - Howmet Aerospace Inc. (HWM) is experiencing ongoing weakness in its commercial transportation market, with revenues declining 4% year-over-year in Q2 2025, following a 14% drop in Q1 2025 [1][7] - The decline in revenue is attributed to softer OEM builds, particularly in the Forged Wheels segment, and lower commercial truck builds due to tariff-related and economic uncertainties in North America [1][7] - The company's cost of goods sold (COGS) increased by 7.3% in 2024 and 3% in the first half of 2025, driven by rising aluminum prices and supply-chain volatility [2][7] Group 2: Market Dynamics - Despite challenges in the commercial transportation sector, solid momentum in the commercial and defense aerospace markets is supporting HWM's performance, with robust orders for engine spares for the F-35 program and aerospace fastening systems [3] - Supply-chain volatility and tariff-related headwinds are expected to continue impacting HWM's delivery of finished products and operational costs [2] Group 3: Competitive Landscape - HWM's peer, Kennametal Inc. (KMT), is also facing softness in its Metal Cutting segment, with organic revenues decreasing 4% year-over-year in Q4 of fiscal 2025 due to reduced demand in the transportation end market [4] - GE Aerospace is experiencing strong demand for its engines and services, supported by increasing air traffic and fleet renewal activities, indicating a contrasting performance in the aerospace sector [5] Group 4: Valuation and Estimates - HWM's shares have surged 34% over the past six months, outperforming the industry's growth of 20.5% [6] - The company is currently trading at a forward price-to-earnings ratio of 43.51X, which is above the industry average of 28.19X, and carries a Value Score of D [9] - The Zacks Consensus Estimate for HWM's earnings has been on the rise over the past 60 days, indicating positive sentiment among analysts [10]

Core Viewpoint - Howmet Aerospace Inc. (HWM) is currently positioned as a stronger investment compared to L3Harris Technologies, Inc. (LHX) due to its robust growth in both commercial and defense aerospace markets, while L3Harris faces challenges from high debt and labor shortages [2][24]. Howmet Aerospace Inc. (HWM) - The commercial aerospace market is a significant growth driver for Howmet, with revenues increasing by 8% year over year in Q2 2025, accounting for 52% of its business [4]. - Demand for Howmet's products is supported by the rise in air travel and the production recovery of Boeing 737 MAX aircraft [4]. - The defense segment also shows strong performance, with revenues surging 21% year over year in Q2 2025, making up 17% of the company's business [5]. - The U.S. Defense Appropriations Act for FY 2026 allocates $831.5 billion, which is expected to benefit Howmet's defense contracts [6]. - Howmet has a shareholder-friendly approach, paying $83 million in dividends and repurchasing $300 million in shares in the first half of 2025 [7]. - The company has a strong liquidity position, with cash equivalents and receivables of $545 million against short-term maturities of only $5 million [9]. - The Zacks Consensus Estimate for HWM's 2025 sales and EPS indicates year-over-year growth of 9.4% and 32.7%, respectively [15]. L3Harris Technologies, Inc. (LHX) - L3Harris benefits from solid U.S. budget funding, particularly with its HBTSS satellite, which is crucial for tracking hypersonic missiles [10][11]. - The company has secured significant international revenues, accounting for approximately 20.7% of total revenues in Q2 2025 [11]. - L3Harris has faced challenges due to a high debt level of $10.98 billion, which exceeds its cash and cash equivalents of $480 million [13]. - Labor shortages in the aerospace-defense industry pose a risk to L3Harris's ability to meet production timelines [14]. - The Zacks Consensus Estimate for LHX's 2025 sales indicates a modest growth of 2%, but EPS is projected to decline by 19.9% [15]. Price Performance and Valuation - Over the past year, Howmet shares have increased by 76.9%, while L3Harris stock has gained 20.4% [18]. - Howmet is trading at a forward P/E ratio of 42.42X, above its three-year median of 28.18X, while L3Harris's forward P/E is at 23.61X, above its median of 16.34X [19].

Core Viewpoint - Investors are seeking growth stocks that demonstrate above-average growth potential, with Howmet (HWM) being highlighted as a strong candidate due to its favorable growth metrics and Zacks Rank [2][11]. Group 1: Earnings Growth - Howmet has a historical EPS growth rate of 30.1%, with projected EPS growth of 32.8% for the current year, significantly outperforming the industry average of 18.9% [5]. - Earnings growth is a critical factor for attracting investor interest, particularly double-digit growth which indicates strong future prospects [4]. Group 2: Asset Utilization - Howmet's asset utilization ratio (sales-to-total-assets ratio) stands at 0.72, indicating that the company generates $0.72 in sales for every dollar in assets, surpassing the industry average of 0.58 [6]. Group 3: Sales Growth - The company's sales are projected to grow by 9.3% this year, compared to the industry average of 3.1%, highlighting its strong sales growth potential [7]. Group 4: Earnings Estimate Revisions - The current-year earnings estimates for Howmet have been revised upward, with the Zacks Consensus Estimate increasing by 2.4% over the past month, indicating positive momentum [9]. Group 5: Overall Assessment - Howmet has achieved a Growth Score of B and a Zacks Rank of 2, suggesting it is a solid choice for growth investors and a potential outperformer in the market [11].

Core Viewpoint - Airbus Group (EADSY) is currently viewed as a better value investment compared to Howmet (HWM) based on various valuation metrics [1][7]. Valuation Metrics - EADSY has a forward P/E ratio of 27.92, while HWM has a significantly higher forward P/E of 48.49 [5]. - The PEG ratio for EADSY is 1.22, indicating a more favorable valuation relative to its expected EPS growth compared to HWM's PEG ratio of 2.25 [5]. - EADSY's P/B ratio stands at 7.11, whereas HWM's P/B ratio is 14.01, further highlighting EADSY's relative undervaluation [6]. Earnings Outlook - Both EADSY and HWM have a Zacks Rank of 2 (Buy), indicating a positive earnings outlook supported by favorable analyst estimate revisions [3].

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Howmet (HWM), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank for making informed investment decisions [1][5][10]. Brokerage Recommendations for Howmet - Howmet has an average brokerage recommendation (ABR) of 1.46, indicating a consensus between Strong Buy and Buy, based on recommendations from 24 brokerage firms [2][4]. - Out of the 24 recommendations, 18 are Strong Buy and 1 is Buy, which accounts for 75% and 4.2% of all recommendations respectively [2]. Limitations of Brokerage Recommendations - The article highlights that brokerage recommendations may not be reliable due to the vested interests of brokerage firms, which often lead to overly optimistic ratings [6][10]. - Research indicates that for every "Strong Sell" recommendation, there are five "Strong Buy" recommendations, suggesting a bias in favor of positive ratings [6][10]. Zacks Rank as an Alternative - The Zacks Rank is presented as a more effective tool for predicting stock price movements, categorizing stocks into five groups based on earnings estimate revisions [8][11]. - The Zacks Rank is timely and reflects the latest earnings estimates, unlike the ABR, which may not be up-to-date [12]. Current Earnings Estimates for Howmet - The Zacks Consensus Estimate for Howmet has increased by 2.4% over the past month to $3.57, indicating growing optimism among analysts regarding the company's earnings prospects [13]. - This increase in consensus estimates has contributed to a Zacks Rank of 2 (Buy) for Howmet, suggesting a positive outlook for the stock [14].

Core Insights - Howmet Aerospace Inc. (HWM) is experiencing significant growth in its defense aerospace market, with a 21% year-over-year revenue increase in Q2 2025, accounting for 17% of total sales [1][8] - The Engineered Structures segment also reported a 5% year-over-year revenue increase, driven by strong demand in the defense aerospace sector [2][8] - The recent passage of the fiscal year 2026 Defense Appropriations Act, allocating $831.5 billion, positions Howmet to secure more contracts and enhance its revenue potential [3][4] Segment Performance - The Engineered Structures segment's revenue growth is attributed to increased military funding and demand for engine spares, particularly related to the F-35 program [2][4] - Howmet's defense aerospace market is expected to maintain strong demand momentum due to consistent government support and robust military programs [4] Competitive Landscape - Textron Inc. is also gaining momentum in its defense business, securing contracts with the U.S. military, including a recent deal with the Tunisian Air Force [5] - GE Aerospace's Defense & Propulsion Technologies business is benefiting from rising demand, having secured a $5 billion contract from the U.S. Air Force [6] Financial Performance - Howmet's shares have surged 78.7% over the past year, significantly outperforming the industry growth of 12.1% [7] - The company is currently trading at a forward price-to-earnings ratio of 42.73X, above the industry average of 27.25X, indicating a premium valuation [10] Earnings Estimates - The Zacks Consensus Estimate for HWM's 2025 earnings has been on the rise over the past 60 days, reflecting positive sentiment among analysts [11]