Why Aerospace Company Howmet's Shares Are Jumping Today

Howmet Aerospace Inc HWM reported third-quarter FY23 revenue growth of 16% year-over-year to $1.66 billion, beating the consensus of $1.60 billion. The revenue increase was driven by growth in the commercial aerospace of 23%.

Revenue by Segments: Engine Products $798 million (+17% Y/Y); Fastening Systems $348 million (+20% Y/Y); Engineered Structures $227 million (+18% Y/Y); and Forged Wheels $285 million (+7% Y/Y).

Adjusted EPS improved 28% Y/Y to $0.46, beating the consensus of $0.43.

Operating income increased by 34.7% Y/Y to $307 million, and the margin expanded by 261 bps to 18.5%.

Adjusted EBITDA excluding special items was $382 million (+18% Y/Y), and the margin was 23%, up 50 bps compared to last year.

During the quarter, HWM repurchased $25 million of common stock at an average price of $49.32 per share. As of October 31, 2023, the total share repurchase authorization available was $797 million.

Howmet Aerospace's operating cash flow for the nine months ended September 30, 2023, was $443 million, compared to $278 million a year ago, and its free cash flow was $279 million. At the end of the quarter, the company's cash balance was $425 million.

"Commercial transportation markets have been resilient, but we remain cautious given softening leading indicators," commented John Plant, Howmet Aerospace Executive Chairman and Chief Executive Officer.

"We expect above-trend growth to continue in full year 2024, with a cautious view on commercial aerospace growth until we see sustained achievement of build rate increases at aircraft OEMs. Our preliminary view envisions year-over-year revenue growth of approximately 7%," added Plant.

On September 28, 2023, the company declared a quarterly dividend of $0.05 per share to be paid on November 27, 2023, to the holders of record on November 10, 2023. The quarterly dividend represents a 25% increase from the third quarter 2023 dividend of $0.04 per share.

4Q23 Outlook: Howmet Aerospace expects revenue of $1.62 billion - $1.65 billion (consensus $1.62 billion) and adjusted EPS of $0.44- $0.46 (consensus $0.44).

HWM expects an adjusted EBITDA of $370 million - $380 million and an adjusted EBITDA margin of 22.8%- 23%.

FY23 Outlook, raised: Howmet Aerospace expects revenue of $6.53 billion-$6.56 billion (Prior view $6.40 billion - $6.47 billion) versus the consensus of $6.47 billion.

Adjusted EPS of $1.76-$1.78 (prior view $1.69 - $1.71) versus the consensus of $1.73.

The company now expects adjusted EBITDA of $1.48 billion-$1.49 billion (prior $1.435 billion - $1.455 billion), an adjusted EBITDA margin of ~22.7% (prior 22.4% - 22.5%), and free cash flow of $600 million - $670 million.

Price Action: HWM shares are trading higher by 7.7% at $48.17 on the last check Thursday.