Why Aerospace Company Howmet's Shares Are Higher Today

Howmet Aerospace Inc HWM shares are trading higher after the company reported fourth-quarter FY23 results.

Revenue grew 14% Y/Y to $1.73 billion, beating the consensus of $1.65 billion, driven by growth in the commercial aerospace of 22% Y/Y.

Revenue by Segments: Engine Products $852 million (+16% Y/Y); Fastening Systems $360 million (+26% Y/Y); Engineered Structures $244 million (+6% Y/Y); and Forged Wheels $275 million (+3% Y/Y).

Adjusted EBITDA excluding special items was $398 million (+18% Y/Y), and the margin was 23.0%.

Adjusted operating income increased by 23% Y/Y to $330 million, and the margin expanded by 130 bps Y/Y to 19.1%.

Adjusted EPS improved 39% Y/Y to $0.53, beating the consensus of $0.47.

Howmet Aerospace’s operating cash flow for the year stood at $901 million, compared to $733 million a year ago, and its free cash flow was $682 million. At the end of the quarter, the company’s cash balance was $610 million.

During the quarter, Howmet Aerospace repurchased $100 million of common stock at an average price of $52.52 per share. As of February 1, 2024, the company has available share repurchase authorization of $697 million.

On November 27, 2023, the company paid a quarterly dividend of $0.05 per share, representing a 25% increase from the third quarter 2023 dividend of $0.04 per share.

First-quarter FY24 Outlook: Howmet Aerospace expects revenue of $1.73 billion – $1.75 billion (consensus $1.71 billion) and adjusted EPS of $0.50- $0.52 (consensus $0.50).

The company expects an adjusted EBITDA of $395 million-$405 million and an adjusted EBITDA margin of 22.8%-23.1%.

FY24 Outlook: Howmet Aerospace expects revenue of $7.00 billion-$7.20 billion versus the consensus of $7.06 billion and adjusted EPS of $2.10-$2.20 versus the consensus of $2.17.

The company expects an adjusted EBITDA of $1.60 billion-$1.67 billion, an adjusted EBITDA margin of 22.9%-23.2%, and a free cash flow of $700 million – $770 million.

John Plant, Executive Chairman and Chief Executive Officer, said, “The outlook for commercial aerospace continues to be strong, supported by record backlogs at the aircraft OEMs, as well as accelerating spares demand due to the increased service requirements of the newer, more fuel-efficient aircraft engines.”

“We expect above-trend growth to continue in full year 2024, albeit with a cautious view until we see sustained achievement of build rate increases at aircraft OEMs. We expect healthy growth in 2024 in our defense aerospace and industrial end markets.” 

“In commercial transportation, softening leading indicators warrant a cautious view, though we expect a downcycle to be confined to 2024. Our 2024 outlook envisions total revenue growth of approximately 7%.”

Price Action: HWM shares are up 4.35% at $61.39 on the last check Tuesday.