Howmet Aerospace(US:HWM)2025-10-30 15:02Financial Data and Key Metrics Changes - Revenue growth accelerated to 14% in Q3 2025, up from 8% in the first half of the year [6] - EBITDA increased by 26%, and operating income rose by 29% [6] - Cash flow was reported at $423 million after capital expenditures of $108 million [6] - Earnings per share increased by over 34% to $0.95 [7] - Net leverage improved to 1.1 times net debt to EBITDA [7][12] - Free cash flow guidance for 2025 was raised to $1.3 billion [22] Business Line Data and Key Metrics Changes - Commercial Aerospace revenue increased by 15%, with parts sales up 38% and total spares up 31% [6][9] - Defense Aerospace revenue grew by 24%, driven by a 33% increase in engine spares [9] - Commercial Transportation revenue decreased by 3%, with wheels volume down 16% [9] - Industrial and other markets saw an 18% increase, with oil and gas up 33% and IGT up 23% [9] Market Data and Key Metrics Changes - Total revenue from end markets was up 14%, with commercial aerospace exceeding $1.1 billion [9] - The combination of spares for commercial aero, defense aero, IGT, and oil and gas was up 31% in Q3 [10] - The balance sheet strengthened with a cash balance of $660 million and a $1 billion undrawn revolver [12] Company Strategy and Development Direction - The company is focused on expanding its manufacturing footprint with five new plants, particularly the Michigan Aero engine core and casting plant [20][21] - Investments in technology and automation are expected to enhance productivity and yield [72] - The company aims to convert 90% of net income into free cash flow while maintaining high capital expenditures [36][91] Management's Comments on Operating Environment and Future Outlook - The outlook for air travel and commercial aerospace remains strong, with a backlog of aircraft extending for many years [18] - Demand for defense sales is steady, with growth in both F-35 and legacy fighter jets [18] - The company anticipates revenue of approximately $9 billion for 2026, reflecting a 10% year-on-year increase [21] Other Important Information - The company repurchased $200 million of common stock in Q3, with a total of $600 million year-to-date [12] - A 20% increase in quarterly dividends was announced, bringing the total to $0.12 per share [13] Q&A Session Summary Question: Insights on competitive landscape for turbines and industrial gas turbines - Management highlighted the growing demand for electricity due to data center buildouts and the need for reliable power sources, indicating a solid investment outlook in this sector [30][34] Question: End market growth expectations for 2026 - Management expects stronger growth in commercial aerospace, with increased build rates for narrow-body aircraft and a mid-single-digit increase in defense sales [48][49] Question: Impact of tariffs and raw material pricing - Management reported that the net effect of tariffs remains minimal, around $5 million, and they are confident in their pass-through capabilities [64][65] Question: Future of Howmet and its growth trajectory - Management expressed optimism about the company's growth trajectory, emphasizing the importance of technology investments and operational improvements [71][72] Question: Incremental margins and pricing dynamics - Management noted that various factors, including volume leverage and automation, contribute to healthy incrementals, with expectations to maintain above historical ranges [78][82]