Why Aerospace Company Howmet's Shares Are Surging Thursday

Howmet Aerospace Inc. HWM shares are trading higher after the company reported better-than-expected Q1 FY24 financial results.

Revenue grew 14% Y/Y to $1.82 billion, beating the consensus of $1.736 billion, driven by growth in the commercial aerospace of 23% Y/Y.

Revenue by Segments: Engine Products $885 million (+11% Y/Y); Fastening Systems $389 million (+25% Y/Y); Engineered Structures $262 million (+27% Y/Y); and Forged Wheels $288 million (flat Y/Y).

Adjusted EBITDA excluding special items was $437 million (+21% Y/Y), and the margin was 24.0%.

Adjusted operating income increased by 27% Y/Y to $370 million, and the margin expanded by 210 bps Y/Y to 20.3%.

Adjusted EPS stood at $0.57, beating the consensus of $0.52.

Howmet Aerospace’s operating cash flow stood at $177 million, compared to $23 million in the prior year quarter, and its free cash flow was $95 million. At the end of the quarter, the company’s cash balance was $533 million.

During the quarter, Howmet Aerospace repurchased $150 million of common stock at an average price of $66.87 per share. As of May 1, 2024, the total share repurchase authorization available was $547 million.

Dividend: On February 26, 2024, the company paid a quarterly dividend of $0.05 per share.

The company expects to increase the quarterly dividend per share to $0.07, beginning in the third quarter of 2024, subject to the Board of Directors’ approval.

Second-quarter FY24 Outlook: Howmet Aerospace expects revenue of $1.825 billion-$1.845 billion (consensus $1.774 billion) and adjusted EPS of $0.57-$0.59 (consensus $0.54).

The company expects an adjusted EBITDA of $435 million-$445 million and an adjusted EBITDA margin of 23.8%-24.1%.

FY24 Outlook Raised: Howmet Aerospace increased its revenue outlook to $7.225 billion-$7.375 billion (from $7.00 billion-$7.20 billion) versus the consensus of $7.148 billion and adjusted EPS to $2.31-$2.39 (from $2.10-$2.20) vs. the consensus of $2.20.

John Plant, Executive Chairman, and Chief Executive Officer, said, “Demand for air travel continues to be robust, exceeding pre-pandemic levels, and supports record aircraft OEM backlogs. Against this healthy backcloth, quality issues at Boeing have resulted in much slower 737 MAX production than expected.”

“We now assume sharply lower 737 MAX volumes in our guidance with an average build rate of 20 per month for full year 2024. However, a more favorable demand outlook in other aspects of our business have driven an overall $200 million increase in Howmet Aerospace’s full year 2024 revenue guidance.”

Investors can gain exposure to the stock via IShares U.S. Aerospace & Defense ETF ITA and First Trust Exchange-Traded Fund First Trust Indxx Aerospace & Defense ETF MISL.

Price Action: HWM shares are up 8.58% at $72.51 at the last check Thursday.

Photo via Wikimedia Commons