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Howmet Aerospace Inc. (HWM - Free Report) reported mixed third-quarter 2021 results. Its earnings surpassed the Zacks Consensus Estimate by 8% while sales lagged the same by 0.8%.
Earnings, excluding special items, were 27 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 25 cents. On a year-over-year basis, earnings increased a whopping 800% from the year-ago quarter’s 3 cents per share, driven by an increase in revenues.
On a sequential basis, the company’s bottom line increased 22.7% from 22 cents.
Revenue Details
In the quarter under review, Howmet Aerospace’s net sales were $1,283 million, reflecting a 13.1% increase from the year-ago quarter. The increase was backed by an improvement in commercial aerospace, commercial transportation, and industrial gas turbine markets along with its pricing actions, partially offset by weakness in the defense aerospace market.
The company’s top line lagged the Zacks Consensus Estimate of $1,294 million.
On a sequential basis, the company’s revenues increased 7% on the back of strength in the commercial aerospace market.
Howmet Aerospace reports revenues under four segments. A brief discussion on the quarterly results is provided below.
Engine Products’ revenues totaled $599 million, representing 46.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 24%, driven by strength in the commercial aerospace and industrial gas turbine markets, partially offset by softness in the defense aerospace market.
The Fastening Systems segment generated revenues of $254 million, accounting for 19.8% of net revenues in the reported quarter. Revenues declined 6% year over year on the back of poor performance in the commercial aerospace market, partially offset by gains in the industrial and commercial transportation markets.
The Engineered Structures segment’s revenues, representing 15.5% of net revenues, decreased 3% year over year to $199 million. Defense aerospace adversely impacted results in the reported quarter.
Forged Wheels revenues totaled $231 million, representing 18% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 34%, driven by growth in the commercial transportation market.
Howmet Aerospace Inc. Price, Consensus and EPS Surprise
In the reported quarter, Howmet Aerospace’s cost of goods sold increased 3.1% year over year to $928 million. It represented 72.3% of the reported quarter’s net sales compared with 79.4% in the year-ago quarter.
Selling, general, administrative, and other expenses increased 6.1% year over year to $70 million. It represented 5.5% of net sales in the reported quarter compared with 5.8% in the year-ago quarter. Research and development expenses were $4 million in the quarter, declining from $5 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $292 million and adjusted EBITDA margin was 22.8%. Operating profits (excluding special items) increased 124% year over year to $224 million, whereas margin grew 870 basis points (bps) to 17.5%.
Net interest expenses in the quarter totaled $63 million, down 18.2% from the year-ago quarter. Adjusted tax rate in the reported quarter was 25.9%.
Balance Sheet & Cash Flow
Exiting the third quarter of 2021, Howmet Aerospace had cash and cash equivalents of $724 million, increasing 1.3% from $715 million recorded in the last reported quarter. Long-term debt was $4,272 million, up 1.1% from $4,227 million at the end of second-quarter 2021. In the first nine months of 2021, the company repaid debts worth $1,491 million.
In the first nine months of 2021, Howmet Aerospace generated net cash of $146 million from its operating activities against $142 million used in the year-ago period. Capital spending totaled $138 million compared with $220 million in the year-ago period. Adjusted free cash flow in the first nine months of 2021 was $275 million.
The company paid out dividends of $10 million in the first three quarters of 2021, stable year over year. Also, it repurchased shares worth $225 million in the first nine months of 2021.
Outlook
For 2021, the company updated its revenue projection from $5.05-$5.15 billion to $4.98-$5.01 billion. The mid-point is currently pegged at $5 billion compared with $5.1 billion guided earlier. Earnings (excluding special items) are expected to be 98 cents to $1.01, compared with 95 cents to $1.02 mentioned earlier. The mid-point now stands at $1.00, up from the previously stated 99 cents.
Adjusted EBITDA is expected to be $1.125-$1.145 billion for the year compared with the previously stated $1.145-$1.185 billion. The mid-point has decreased from $1.17 billion to $1.135 billion. EBITDA margin projection at 22.7% represents a 20-bps decrease from the previously mentioned number. Adjusted free cash flow is predicted to be $425-$475 million, with a mid-point of $450 million. The earlier guidance was $415-$485 million, with $450 million as the mid-point.
For the fourth quarter, the company anticipates revenues of $1.295-$1.325 billion, with the mid-point of $1.315 billion. Earnings (excluding special items) are expected to be 27-30 cents (the mid-point being 29 cents), while adjusted EBITDA is predicted to be $290-$310 million (the mid-point being $300 million).
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
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Howmet Aerospace (HWM) Q3 Earnings Beat Estimates, Rise Y/Y
Howmet Aerospace Inc. (HWM - Free Report) reported mixed third-quarter 2021 results. Its earnings surpassed the Zacks Consensus Estimate by 8% while sales lagged the same by 0.8%.
Earnings, excluding special items, were 27 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 25 cents. On a year-over-year basis, earnings increased a whopping 800% from the year-ago quarter’s 3 cents per share, driven by an increase in revenues.
On a sequential basis, the company’s bottom line increased 22.7% from 22 cents.
Revenue Details
In the quarter under review, Howmet Aerospace’s net sales were $1,283 million, reflecting a 13.1% increase from the year-ago quarter. The increase was backed by an improvement in commercial aerospace, commercial transportation, and industrial gas turbine markets along with its pricing actions, partially offset by weakness in the defense aerospace market.
The company’s top line lagged the Zacks Consensus Estimate of $1,294 million.
On a sequential basis, the company’s revenues increased 7% on the back of strength in the commercial aerospace market.
Howmet Aerospace reports revenues under four segments. A brief discussion on the quarterly results is provided below.
Engine Products’ revenues totaled $599 million, representing 46.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 24%, driven by strength in the commercial aerospace and industrial gas turbine markets, partially offset by softness in the defense aerospace market.
The Fastening Systems segment generated revenues of $254 million, accounting for 19.8% of net revenues in the reported quarter. Revenues declined 6% year over year on the back of poor performance in the commercial aerospace market, partially offset by gains in the industrial and commercial transportation markets.
The Engineered Structures segment’s revenues, representing 15.5% of net revenues, decreased 3% year over year to $199 million. Defense aerospace adversely impacted results in the reported quarter.
Forged Wheels revenues totaled $231 million, representing 18% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 34%, driven by growth in the commercial transportation market.
Howmet Aerospace Inc. Price, Consensus and EPS Surprise
Howmet Aerospace Inc. price-consensus-eps-surprise-chart | Howmet Aerospace Inc. Quote
Margin Profile
In the reported quarter, Howmet Aerospace’s cost of goods sold increased 3.1% year over year to $928 million. It represented 72.3% of the reported quarter’s net sales compared with 79.4% in the year-ago quarter.
Selling, general, administrative, and other expenses increased 6.1% year over year to $70 million. It represented 5.5% of net sales in the reported quarter compared with 5.8% in the year-ago quarter. Research and development expenses were $4 million in the quarter, declining from $5 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $292 million and adjusted EBITDA margin was 22.8%. Operating profits (excluding special items) increased 124% year over year to $224 million, whereas margin grew 870 basis points (bps) to 17.5%.
Net interest expenses in the quarter totaled $63 million, down 18.2% from the year-ago quarter. Adjusted tax rate in the reported quarter was 25.9%.
Balance Sheet & Cash Flow
Exiting the third quarter of 2021, Howmet Aerospace had cash and cash equivalents of $724 million, increasing 1.3% from $715 million recorded in the last reported quarter. Long-term debt was $4,272 million, up 1.1% from $4,227 million at the end of second-quarter 2021. In the first nine months of 2021, the company repaid debts worth $1,491 million.
In the first nine months of 2021, Howmet Aerospace generated net cash of $146 million from its operating activities against $142 million used in the year-ago period. Capital spending totaled $138 million compared with $220 million in the year-ago period. Adjusted free cash flow in the first nine months of 2021 was $275 million.
The company paid out dividends of $10 million in the first three quarters of 2021, stable year over year. Also, it repurchased shares worth $225 million in the first nine months of 2021.
Outlook
For 2021, the company updated its revenue projection from $5.05-$5.15 billion to $4.98-$5.01 billion. The mid-point is currently pegged at $5 billion compared with $5.1 billion guided earlier. Earnings (excluding special items) are expected to be 98 cents to $1.01, compared with 95 cents to $1.02 mentioned earlier. The mid-point now stands at $1.00, up from the previously stated 99 cents.
Adjusted EBITDA is expected to be $1.125-$1.145 billion for the year compared with the previously stated $1.145-$1.185 billion. The mid-point has decreased from $1.17 billion to $1.135 billion. EBITDA margin projection at 22.7% represents a 20-bps decrease from the previously mentioned number. Adjusted free cash flow is predicted to be $425-$475 million, with a mid-point of $450 million. The earlier guidance was $415-$485 million, with $450 million as the mid-point.
For the fourth quarter, the company anticipates revenues of $1.295-$1.325 billion, with the mid-point of $1.315 billion. Earnings (excluding special items) are expected to be 27-30 cents (the mid-point being 29 cents), while adjusted EBITDA is predicted to be $290-$310 million (the mid-point being $300 million).
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Construction sector are Quanta Services, Inc. (PWR - Free Report) , Jacobs Engineering Group Inc. (J - Free Report) , and EMCOR Group, Inc. (EME - Free Report) . While Quanta Services currently sports a Zacks Rank #1 (Strong Buy), Jacobs Engineering and EMCOR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Quanta Services delivered an earnings surprise of 17.20%, on average, in the trailing four quarters.
Jacobs Engineering delivered an earnings surprise of 17.54%, on average, in the trailing four quarters.
EMCOR delivered an earnings surprise of 18.82%, on average, in the trailing four quarters.