Howmet Aerospace(US:HWM) ZACKS·2026-01-07 16:01Core Viewpoint - Howmet Aerospace Inc. (HWM) has experienced significant stock performance, with shares recently trading at over $211, nearing its 52-week high of $216.38, and a year-over-year increase of 92.3%, outperforming the S&P 500 and industry averages [1][2][3] Stock Performance - HWM shares closed at $214.69, reflecting a strong upward momentum as they trade above both 50-day and 200-day moving averages, indicating positive market sentiment [1][4] - The stock has outperformed competitors such as RTX Corporation and General Dynamics, which returned 65.9% and 39% respectively over the past year [2] Market Drivers - The commercial aerospace market is a key growth driver, with revenues increasing 15% year over year in Q3 2025, making up 53% of the company's business [9][10] - Demand for engine spares and a record backlog for new aircraft are contributing to revenue growth, supported by healthy build rates at Airbus and a recovery in Boeing 737 MAX production [10] Defense Sector Growth - The defense aerospace market is also a significant contributor, with revenues rising 24% year over year in Q3, accounting for 17% of total revenues [11] - Recent legislative support for defense spending, including the fiscal year 2026 Defense Appropriations Act, is expected to bolster Howmet's defense business [12] Shareholder Value Initiatives - The company is focused on enhancing shareholder value through dividends and share repurchases, having paid $131 million in dividends and repurchased $500 million in shares in the first nine months of the year [13] - A 20% increase in dividends to 12 cents per share was announced in August 2025, marking the second hike in 2025 [13] Earnings Estimates - Analysts have revised earnings estimates upward, with the Zacks Consensus Estimate for 2025 earnings at $3.69 per share, reflecting a year-over-year growth of 37.2% [14] - The consensus for 2026 earnings is projected at $4.41 per share, indicating a 19.7% increase [14] Challenges - The commercial transportation market has shown persistent weakness, with revenues declining 3% year over year in Q3 2025, following declines in previous quarters [15] - High input costs and operating expenses have also impacted profitability, with the cost of goods sold increasing 7.3% year over year to $5.1 billion in 2024 [16] Valuation Concerns - Howmet's stock is trading at a forward P/E ratio of 48.45X, significantly higher than the industry average of 31.64X and its peers, making it potentially vulnerable to market corrections [17] Conclusion - Despite strong momentum and shareholder-friendly policies, near-term challenges such as weakness in the commercial transportation market and high valuation may limit HWM's prospects [19]