Why This Howmet Aerospace Analyst Is Bullish On An Aircraft Recovery

Although Howmet Aerospace Inc HWM continues to be impacted by the “pandemic-induced demand shock to commercial aerospace,” global aircraft builds are likely to bottom in 2020-2021, according to KeyBanc Capital Markets.

The Howmet Aerospace Analyst: Philip Gibbs initiated coverage of Howmet Aerospace with an Overweight rating and $36 price target. 

The Howmet Aerospace Thesis: The company’s key driver — global aircraft builds — is poised for an upturn in 2022 to 2025, driven by “a snapback in global passenger traffic and associated macro sentiment,” Gibbs said in the initiation note.

A recovery could come in higher-margin aftermarket capital expenditure, starting from the back half of 2021, the analyst said.

“We believe incremental downside in global aircraft production rates is limited based on multiyear backlogs, LT financing availability, the eventual resurgence of Chinese orders and fleet retirements," he said. 

“We encourage cyclical growth investors to add prior to a potential demand resurgence in 2022-2025, with idiosyncratic leverage from airfoils pricing gains and structural cost reductions,” Gibbs said.

HWM Price Action: Shares of Howmet Aerospace were up 0.63% at $28.56 at last check.

(Photo: Howmet via Twitter)