Howmet Aerospace Stock Crosses 50-Day SMA: Should You Buy Now?

Core Insights - Howmet Aerospace Inc. (HWM) has shown strong technical performance, crossing its 50-day simple moving average (SMA) and trading above its 200-day moving average, indicating positive market sentiment and confidence in its financial health [1][2]. Stock Performance - Over the past six months, HWM shares have surged 43.7%, outperforming the Zacks Aerospace - Defense industry (21.7%) and the S&P 500 (17.5%) [3]. - Key rivals, RTX Corporation and General Dynamics, have seen their shares rise by 21.1% and 24.2%, respectively [3]. Revenue Growth - Commercial aerospace revenues grew by 8% year-over-year in Q2 2025, constituting 52% of HWM's business, while defense sales surged by 21% [8][12]. - The increase in air travel and demand for wide-body aircraft has positively impacted HWM's revenues, with a 9% increase in the first quarter of 2025 [11][10]. Defense Market Dynamics - The defense sector is also experiencing growth, supported by a robust defense budget and steady government support, with revenues from defense aerospace increasing by 19% in Q1 2025 [12][13]. - The House of Representatives passed a Defense Appropriations Act with a discretionary allocation of $831.5 billion, which is expected to benefit HWM's defense contracts [13]. Shareholder Returns - HWM has been active in returning value to shareholders, paying $83 million in dividends and repurchasing $300 million in shares in the first half of 2025 [14][15]. - The quarterly dividend was increased by 25% to 10 cents per share in January 2025, and the share repurchase program was expanded by $2 billion [15]. Financial Position - HWM maintains a strong liquidity position, with cash equivalents and receivables totaling $545 million, significantly higher than its short-term maturities of $5 million [16]. - The company generated $699 million in net cash from operating activities in the first half of the year, with free cash flow amounting to $478 million [16]. Earnings Estimates - Analysts have revised earnings estimates upward, with the Zacks Consensus Estimate for 2025 earnings at $3.57 per share, reflecting a year-over-year growth of 32.7% [17]. - The consensus for 2026 earnings is projected at $4.28 per share, indicating a 19.8% increase [17]. Valuation Metrics - HWM is currently trading at a forward P/E ratio of 45.22X, which is higher than the industry average of 27.53X, suggesting potential vulnerability to market sentiment shifts [18][19]. Market Outlook - The robust momentum in both commercial and defense aerospace markets positions HWM favorably for strong growth in the upcoming quarters [21]. - Despite its high valuation, positive analyst sentiment and growth prospects suggest it may be an opportune time for potential investors [22].