Howmet vs. RTX: Which Aerospace & Defense Stock Should You Bet On?

Core Viewpoint - Howmet Aerospace Inc. and RTX Corporation are both experiencing growth in the aerospace and defense industry, driven by increasing air traffic and U.S. budgetary policies, but face different challenges and opportunities in their respective markets [1] Howmet Aerospace - The commercial aerospace market is the primary growth driver for Howmet, with revenues increasing by 20% year over year in 2024, accounting for over 50% of its business [3] - The demand for new, fuel-efficient aircraft and increased spare parts demand for engines are key factors supporting this growth [3] - The defense sector is also performing well, with a 15% year-over-year revenue increase in 2024, bolstered by government support and robust orders for F-35 engine spares [4] - However, Howmet is facing challenges in the commercial transportation market, where revenues declined by 7% year over year in 2024 due to lower OEM builds [5] RTX Corporation - RTX has benefited from a recovery in commercial air traffic, leading to an 11% year-over-year sales growth in the fourth quarter of 2024, primarily driven by double-digit growth in commercial aftermarket sales [6] - The Collins Aerospace unit saw a 6% year-over-year improvement, while Pratt & Whitney's sales grew by 17.5%, with significant contributions from both commercial aftermarket and OEM sales [7] - RTX has a strong defense project pipeline, with a defense backlog of $218 billion at the end of 2024, significantly higher than$90 billion at the end of Q2 2024, indicating strong revenue growth prospects [9] - The company's liquidity position is solid, with cash and cash equivalents totaling $5.58 billion compared to current debt of$2.54 billion, reflecting a strong solvency position [10] Price Performance and Valuation - Over the past three months, Howmet shares have risen by 19.1%, while RTX stock has gained 16.7% [12] - The Zacks Consensus Estimate for Howmet's 2025 sales and EPS implies year-over-year growth of 8.5% and 21.2%, respectively, while RTX's estimates imply growth of 4.4% and 7% [14][16] - RTX is trading at a forward price-to-earnings ratio of 21.1X, which is more attractive compared to Howmet's 39.07X [17] Conclusion - RTX's strong momentum in both commercial and defense aerospace markets, along with a healthy liquidity position and attractive valuation, positions it favorably for future growth [19] - In contrast, Howmet's strength in commercial aerospace is offset by weaknesses in the transportation market, leading to a more cautious outlook for investors [20]