HWM Q1 Earnings Preview: Time to Buy, Sell or Hold the Stock?

Core Viewpoint - Howmet Aerospace Inc. is set to release its first-quarter 2025 results, with earnings expected to show a significant year-over-year increase, despite facing challenges in the commercial transportation market and supply chain disruptions [1][4][5]. Financial Performance - The Zacks Consensus Estimate for earnings is 77 cents per share, reflecting a 35.1% increase from the previous year, while revenues are projected at $1.93 billion, indicating a 6% year-over-year growth [1]. - Earnings estimates have remained stable over the past 60 days, with the current quarter's estimate unchanged at 77 cents per share [2]. Earnings Surprise History - Howmet has a strong earnings surprise history, exceeding the Zacks Consensus Estimate in the last four quarters with an average surprise of 8.3% [2]. Market Conditions - The company is experiencing weakness in the commercial transportation market, particularly in the Forged Wheels segment, due to lower OEM builds [4]. - Production issues at Boeing are expected to negatively impact Howmet's sales, particularly in narrow-body and wide-body aircraft [4]. Supply Chain and Cost Challenges - Howmet has faced supply chain disruptions in the aerospace sector, leading to delays and increased costs, which are likely to affect its performance [5]. - High operating costs, labor shortages, and increased raw material costs are anticipated to hurt the company's bottom line in the upcoming quarter [6]. Positive Market Trends - Despite challenges, Howmet is witnessing strong demand in the commercial aerospace market, driven by increased air travel and OEM spending [7]. - The recovery of the Boeing 737 MAX production is expected to positively influence demand for Howmet's products [8]. - The defense business is also performing well, with robust orders for engine spares for the F-35 program contributing to top-line growth [8]. Stock Performance - Howmet's shares have increased by 9.4% over the past three months, outperforming the Zacks Aerospace - Defense industry, which declined by 4.3% [9]. Valuation Concerns - The company is trading at a forward P/E ratio of 38.62X, significantly higher than the industry average of 23.42X, which may pose risks if market sentiment declines [11]. Long-term Outlook - Howmet's diversified portfolio and strength in the commercial aerospace market suggest promising long-term growth potential [14].