Core Insights - Howmet Aerospace Inc. (HWM) and L3Harris Technologies, Inc. (LHX) are both key players in the aerospace and defense industry, with HWM focusing on components for jet engines and airframes, while L3Harris specializes in integrated technologies [2][3] Group 1: Howmet Aerospace Inc. (HWM) - HWM is experiencing strong growth driven by the commercial aerospace market, with revenues from this sector increasing 15% year over year, exceeding $1.1 billion in Q3 2025, and constituting 53% of its business [5][4] - The demand for engine spares and a record backlog for new, fuel-efficient aircraft are contributing to HWM's performance, supported by healthy build rates at Airbus and a production recovery in Boeing 737 MAX aircraft [6] - HWM's defense aerospace segment also saw a revenue surge of 24% year over year, making up 17% of total revenues, bolstered by strong government support and orders for engine spares for programs like the F-35 [7] - The company has a solid liquidity position, with cash equivalents of $659 million against short-term liabilities of $251 million, and generated net cash of $1.23 billion from operating activities in the first nine months of 2025 [9] - HWM's commitment to shareholder returns is evident, having paid $131 million in dividends and repurchased $500 million in shares, with a 20% dividend increase announced in August 2025 [8] - However, HWM faces challenges from a declining commercial transportation market, with revenues down 3% year over year in Q3 2025, following previous declines [10] Group 2: L3Harris Technologies, Inc. (LHX) - L3Harris is positioned to benefit from U.S. defense budget provisions, with its HBTSS satellite providing a competitive edge in tracking hypersonic missiles, enhancing its role in the Golden Dome program [13] - The company completed a $125 million expansion to support the Department of Defense's needs, and international revenues accounted for approximately 21.5% of total revenues in Q3 2025 [14] - L3Harris is witnessing strong demand for its solutions from various regions, including Asia-Pacific and NATO allies, with NATO members increasing defense spending targets [15] - The company secured a $2.26 billion contract from South Korea for next-generation airborne early warning jets, indicating robust international demand [16] - Despite these positives, L3Harris has a highly leveraged balance sheet, with long-term debt of $11 billion exceeding its cash balance of $0.34 billion, raising concerns about financial stability [17] - Labor shortages in the aerospace-defense industry pose a threat to L3Harris's ability to meet production timelines, potentially impacting performance [18] Group 3: Comparative Analysis - The Zacks Consensus Estimate for HWM indicates a 12.2% growth in sales and a 20.3% increase in EPS for 2026, with estimates trending upward over the past 60 days [19] - In contrast, LHX's estimates suggest a 6.4% growth in sales and a 17.3% increase in EPS for 2026, also showing upward trends [21] - HWM shares have appreciated 79.5% over the past year, while L3Harris shares have gained 58.8% [22] - HWM is trading at a forward P/E ratio of 50.12X, while LHX's forward earnings multiple is 27.55X, indicating a steeper valuation for HWM [23] - Overall, HWM's market leadership and strong growth prospects make it a more attractive investment compared to LHX, despite L3Harris's solid position in the defense sector [28]

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].