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Howmet Aerospace Inc. HWM has been on a great run on the bourses lately as the stock is trading close to its 52-week high of $140.55. Shares of the advanced engineered solutions provider for the aerospace and transportation industries closed at $139.39 yesterday, just 0.8% below the highest point.
Since the release of its fourth-quarter 2024 results on Feb. 13, HWM stock has gained 8.9%. The stock has outperformed the S&P 500 composite’s growth of 1.3% and the aerospace defense industry’s decline of 1.6%.
The company reported impressive results for fourth-quarter 2024, with non-GAAP earnings of 74 cents per share surpassing the Zacks Consensus Estimate by 2.8%. The figure jumped 40% year over year. Revenues of $1.90 billion beat the consensus estimate by 0.7%. The top line increased 9% year over year.
HWM Stock Outperforms Industry & the S&P 500
Image Source: Zacks Investment Research
What’s Behind Howmet Stock’s Momentum?
The strongest driver of Howmet’s business at the moment is the commercial aerospace market. The strength in air travel continues, with wide-body aircraft demand picking up, thereby supporting continued OEM spending. Pickup in air travel has been a positive as the increased usage of aircraft spurs spending on parts and products that the company provides. Solid demand for air travel is also encouraging airlines to purchase more aircraft, which is again driving its sales.
In the fourth quarter, revenues from the commercial aerospace market increased 12.9% year over year, constituting 53% of the company’s business. The sustained strength was attributed to new, more fuel-efficient aircraft with reduced carbon emissions and increased spare demand for engines. The Boeing Company BA is also anticipated to witness a gradual production recovery, particularly in the 737 MAX aircraft, with an end to its workers’ strike, which is likely to boost demand for HWM’s products in the market.
Expanding defense budget remains another growth catalyst for Howmet. While the commercial aerospace market has remained the major driver for the company, the defense side of the industry has also been witnessing positive momentum, cushioned by steady government support. HWM has been witnessing robust orders for engine spares for the F-35 program and other legacy fighters. In the fourth quarter, revenues from the defense aerospace market increased 22% year over year, constituting 16% of the company’s revenues.
It's worth noting that in August 2024, the U.S. Senate Committee on Appropriations approved the fiscal year 2025 Defense Appropriations Act, which provides $852.2 billion in total funding. This reflects a 3.3% increase over the approved funding during fiscal 2024. Such improved budgetary provisions set the stage for Howmet's growth, which remains focused on grabbing more defense contracts.
Driven by its business strength, Howmet expects to generate revenues in the range of $7.93-$8.13 billion in 2025, indicating year-over-year growth of 8% at the mid-point.
Howmet’s sound liquidity position is an added strength. Exiting 2024, the company’s cash equivalents and receivables were $564 million. It generated net cash of $1.3 billion from operating activities in 2024, much higher than $901 million generated in the previous year. Howmet also generated a healthy free cash flow of $977 million in the year, comprising more than 85% of its net income.
HWM’s commitment to rewarding its shareholders through dividends and share buybacks is also encouraging. For instance, in 2024, it paid dividends worth $109 million and repurchased shares for $500 million. In January 2025, the company hiked its dividend by 25% to 10 cents per share (annually: 40 cents).
Also, in July 2024, its board approved an increase in the share repurchase program by $2 billion to $2.487 billion of its common stock. As of Jan. 31, 2025, HWM’s total share repurchase authorization available was $2.15 billion.