Howmet Aerospace Q2: 18% Revenue Growth, Earnings Beat, Raised FY23 Guidance & More

Howmet Aerospace Inc HWM reported second-quarter FY23 revenue growth of 18% year-over-year to $1.65 billion, beating the consensus of $1.61 billion.

The revenue increase was driven by growth in the commercial aerospace market of 23%.

Revenue by Segments: Engine Products $821 million (+26% Y/Y); Fastening Systems $329 million (+19% Y/Y); Engineered Structures $200 million (+8% Y/Y); and Forged Wheels $298 million (+7% Y/Y).

Adjusted EPS improved to $0.44 compared to $0.35 in 2Q22, beating the consensus of $0.43.

Operating income increased 18.3% Y/Y to $285 million, and the margin was flat at 17.3%.

Adjusted EBITDA excluding special items was $368 million (+16% Y/Y), and the margin was 22.3%, down 50 bps compared to last year.

Howmet Aerospace's operating cash flow was $229 million, and its Free cash flow was $188 million.

During the quarter, Howmet Aerospace repurchased ~2.2 million shares for $100 million. As of July 31, 2023, the total share repurchase authorization available was $822 million.

At the end of the quarter, the company's cash balance was $536 million.

Dividend: HMW intends to increase the quarterly dividend from $0.04 to $0.05 per share beginning 4Q23.

Executive Chairman and Chief Executive Officer John Plant commented, "The outlook for Howmet Aerospace continues to be strong and supported by the extraordinary backlog of commercial aircraft orders at Airbus and Boeing. Our key defense aerospace and industrial end markets continue to be solid, while the commercial transportation end market remains healthy, albeit the third quarter tends to be seasonally weaker."

3Q23 Outlook: Howmet Aerospace expects revenue of $1.58 billion - $1.60 billion (consensus $1.57 billion) and adjusted EPS of $0.41- $0.43 (consensus $0.42).

It expects an adjusted EBITDA of $355 million - $365 million and an Adjusted EBITDA margin of 22.5%- 22.8%.

FY23 Outlook, raised: Howmet Aerospace expects revenue of $6.4 billion - $6.47 billion (prior view $6.2 billion - $6.325 billion) versus the consensus of $6.38 billion.

Adjusted EPS of $1.69 - $1.71 (prior $1.65 - $1.70) versus the consensus of $1.71.

The company now expects adjusted EBITDA of $1.435 billion - $1.455 billion, an Adjusted EBITDA margin of 22.4% - 22.5%, and Free Cash Flow of $600 million - $670 million.

Price Action: HWM shares are trading lower by 4.7% at $48.70 on the last check Tuesday.