With a market cap of $40.8 billion, Pittsburgh, Pennsylvania-based Howmet Aerospace Inc. (HWM) operates in the aerospace and transportation sectors and specializes in advanced engineered solutions. The company provides components for jet engines, structural aerospace parts, and forged aluminum wheels, serving markets worldwide across defense, commercial aviation, and industrial applications.
Shares of the aerospace and defense supplier have significantly outperformed the broader market over the past 52 weeks. HWM has surged 108.1% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 31.1%. In 2024, shares of HWM are up 84.5%, compared to SPX’s 19.8% gain on a YTD basis.
Focusing more closely, Howmet Aerospace has also outpaced the SPDR S&P Aerospace & Defense ETF’s (XAR) 28.2% return over the past 52 weeks and a 14.7% YTD return.
Howmet Aerospace has outperformed due to strong growth in the commercial aerospace market, which represents over half of its revenue, driven by robust air travel demand and expanded build rates for aircraft. Also, it has shown significant margin improvements and rising sales in core segments like engine products and fastening systems.
Moreover, the stock surged 13.2% on Jul. 30 after the company posted strong Q2 results, with EPS of $0.67 and revenue of $1.9 billion, both beating Wall Street’s estimates, driven by solid performance in its engine products and engineered structures segments. Additionally, Howmet raised its full-year EPS to $2.53 – $2.57 on sales of $7.4 billion to $7.5 billion, above analysts’ projections, as it anticipates continued strong demand for aerospace components amid high air travel demand and an aging fleet. The company also reported $342 million in free cash flow, enabling stock buybacks and debt reduction, which reassured investors of its financial strength and growth potential.
For the current fiscal year, ending in December, analysts expect HWM’s EPS to grow 40.8% year-over-year to $2.59. The company’s earnings surprise history is promising. It topped the consensus estimates in all of the last four quarters.
Among the 21 analysts covering the stock, the consensus rating is a “Strong Buy.” That’s based on 17 “Strong Buy” ratings, one “Moderate Buy,” two “Holds,” and one “Strong Sell.”
On Oct. 21, Bernstein raised Howmet Aerospace’s price target to $127 and maintained an “Outperform” rating, citing improved long-term outlook, higher market multiple, and further upside potential ahead of quarterly results.
The mean price target of $108.73 represents a premium of just 8.9% to HWM’s current levels. The Street-high price target of $127, implies a potential upside of 27.2% from the current price levels.
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