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Howmet Aerospace Inc. (HWM - Free Report) has reported mixed fourth-quarter 2021 results. The company’s earnings surpassed the Zacks Consensus Estimate by 3.45%, whereas sales lagged the same by 2.36%.
Earnings, excluding special items, were 30 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 29 cents. On a year-over-year basis, earnings increased 42.9% from the year-ago quarter’s 21 cents per share, driven by an increase in revenues and lower interest expenses. Quarterly earnings were at the high-end of the company’s projection of 27-30 cents.
On a sequential basis, Howmet’s bottom line increased 11.1% from 27 cents.
In 2021, the company’s earnings, excluding special items, were $1.01 per share, increasing from the previous year’s figure of 80 cents. The bottom line surpassed the Zacks Consensus Estimate of $1.00.
Revenue Details
In the quarter under review, Howmet’s net sales were $1,285 million, reflecting a 3.8% increase from the year-ago quarter. The increase was backed by an improvement in the commercial aerospace and commercial transportation markets along with its pricing actions. Weakness in the defense aerospace market was a spoilsport.
Howmet’s top line lagged the Zacks Consensus Estimate of $1,316 million and the company’s projection of $1.295-$1.325 billion. On a sequential basis, HWM’s revenues increased 0.2%.
Howmet reports revenues under four segments. A brief discussion on the quarterly results is provided below.
Engine Products’ revenues totaled $605 million, representing 47.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 9%, driven by strength in the commercial aerospace market, partially offset by softness in the defense aerospace market.
The Fastening Systems segment generated revenues of $256 million, accounting for 19.9% of net revenues in the reported quarter. Revenues declined 2.7% year over year on the back of poor performance in the commercial aerospace market, partially offset by gains in the commercial transportation market.
The Engineered Structures segment’s revenues, representing 14.8% of net revenues, decreased 12.4% year over year to $190 million. Defense aerospace adversely impacted results in the reported quarter, partially offset by gains in the commercial aerospace market.
Forged Wheels revenues totaled $234 million, representing 18.2% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 15.3%, driven by growth in the commercial transportation market.
In 2021, the company’s revenues totaled $5 billion, reflecting a decrease of 5.5% from the previous year. The top line was in line with the Zacks Consensus Estimate.
Margin Profile
In the reported quarter, Howmet’s cost of goods sold increased 7.6% year over year to $938 million. It represented 73% of the reported quarter’s net sales compared with 70.4% in the year-ago quarter.
Selling, general, administrative, and other expenses increased 5.2% year over year to $61 million. It represented 4.8% of net sales in the reported quarter compared with 4.7% in the year-ago quarter. Research and development expenses were $4 million in the quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $296 million and adjusted EBITDA margin was 23%. Operating profits (excluding special items) increased 6.5% year over year to $229 million, whereas margin grew 40 basis points (bps) to 17.8%.
Net interest expenses in the quarter totaled $58 million, down 23.7% from the year-ago quarter. The adjusted tax rate in the reported quarter was 20.7%.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Howmet had cash and cash equivalents of $720 million, decreasing 0.6% from $724 million recorded in the last reported quarter. Long-term debt was $4,227 million, down1.1% from $4,272 million at the end of third-quarter 2021. In 2021, the company repaid debts worth $1,538 million, while repayments of the same totaled $700 million.
Reduction in debts in the year lowered annualized interest expenses by $70 million.
In 2021, Howmet generated net cash of $449 million from its operating activities compared with $9 million in the previous year. Capital spending totaled $199 million compared with $267 million in 2020. Adjusted free cash flow was $517 million in 2021.
The company paid out dividends of $19 million in 2021, increasing 72.7% from the previous year. Also, it repurchased 13.4 million shares worth $430 million in 2021, up from $73 million in 2020.
In January 2022, the repurchase of 3 million shares for $100 million has been executed by the company. Exiting the initial month of 2021, HWM is left to buyback $1.247 billion worth of shares. In addition, the company announced that it would pay a quarterly dividend of 2 cents per share to shareholders of record as of Feb 4, 2022, on Feb 25.
Outlook
For 2022, the company anticipates revenues of $5.56-$5.72 billion. The mid-point is currently pegged at $5.64 billion. Earnings (excluding special items) are expected to be $1.31-$1.43, with the mid-point at $1.37.
Adjusted EBITDA is expected to be $1.265-$1.335 billion for the year, with the mid-point of $1.3 billion. The EBITDA margin is projected at 22.8%-23.3%, the midpoint being 23%. Adjusted free cash flow is predicted to be $575-$675 million, with a mid-point of $625 million.
For the first quarter, the company anticipates revenues of $1.28-$1.32 billion, with the mid-point of $1.30 billion. Earnings (excluding special items) are expected to be 28-30 cents (the mid-point being 29 cents), while adjusted EBITDA is predicted to be $286-$304 million (the mid-point being $295 million).
Howmet Aerospace Inc. Price, Consensus and EPS Surprise
With a market capitalization of $13.3 billion, Howmet currently carries a Zacks Rank #4 (Sell).
Three other companies from the industry to report results in February are discussed below:
Jacobs Engineering Group Inc. (J - Free Report) will release fourth-quarter results on Feb 8, before market open. It presently carries a Zacks Rank #2 (Buy).
The company reported better-than-expected results in the last four quarters, with an average earnings surprise of 12.71%. The Zacks Consensus Estimate for Jacobs fourth-quarter earnings is pegged at $1.61.
AECOM (ACM - Free Report) is slated to release first-quarter fiscal 2022 (ended December 2021) on Feb 7, after market close. It presently carries a Zacks Rank #3 (Hold).
In the last four quarters, the company recorded better-than-expected results in three and in-line results in one. It pulled off a trailing four-quarter earnings surprise of 4.09%, on average. The Zacks Consensus Estimate for AECOM’s fiscal first-quarter earnings is pegged at 77 cents.
Fluor Corporation (FLR - Free Report) presently carries a Zacks Rank #3. The company is slated to report fourth-quarter 2021 results on Feb 22, before market open.
The company reported better-than-expected results in three of the last four quarters and laggedin one. The earnings surprisefor the quarters is -73.34%, on average. The Zacks Consensus Estimate for Fluor’s fourth-quarter earnings is pegged at 28 cents.
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Howmet (HWM) Tops Q4 Earnings Estimates, Gives Solid View
Howmet Aerospace Inc. (HWM - Free Report) has reported mixed fourth-quarter 2021 results. The company’s earnings surpassed the Zacks Consensus Estimate by 3.45%, whereas sales lagged the same by 2.36%.
Earnings, excluding special items, were 30 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 29 cents. On a year-over-year basis, earnings increased 42.9% from the year-ago quarter’s 21 cents per share, driven by an increase in revenues and lower interest expenses. Quarterly earnings were at the high-end of the company’s projection of 27-30 cents.
On a sequential basis, Howmet’s bottom line increased 11.1% from 27 cents.
In 2021, the company’s earnings, excluding special items, were $1.01 per share, increasing from the previous year’s figure of 80 cents. The bottom line surpassed the Zacks Consensus Estimate of $1.00.
Revenue Details
In the quarter under review, Howmet’s net sales were $1,285 million, reflecting a 3.8% increase from the year-ago quarter. The increase was backed by an improvement in the commercial aerospace and commercial transportation markets along with its pricing actions. Weakness in the defense aerospace market was a spoilsport.
Howmet’s top line lagged the Zacks Consensus Estimate of $1,316 million and the company’s projection of $1.295-$1.325 billion. On a sequential basis, HWM’s revenues increased 0.2%.
Howmet reports revenues under four segments. A brief discussion on the quarterly results is provided below.
Engine Products’ revenues totaled $605 million, representing 47.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 9%, driven by strength in the commercial aerospace market, partially offset by softness in the defense aerospace market.
The Fastening Systems segment generated revenues of $256 million, accounting for 19.9% of net revenues in the reported quarter. Revenues declined 2.7% year over year on the back of poor performance in the commercial aerospace market, partially offset by gains in the commercial transportation market.
The Engineered Structures segment’s revenues, representing 14.8% of net revenues, decreased 12.4% year over year to $190 million. Defense aerospace adversely impacted results in the reported quarter, partially offset by gains in the commercial aerospace market.
Forged Wheels revenues totaled $234 million, representing 18.2% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 15.3%, driven by growth in the commercial transportation market.
In 2021, the company’s revenues totaled $5 billion, reflecting a decrease of 5.5% from the previous year. The top line was in line with the Zacks Consensus Estimate.
Margin Profile
In the reported quarter, Howmet’s cost of goods sold increased 7.6% year over year to $938 million. It represented 73% of the reported quarter’s net sales compared with 70.4% in the year-ago quarter.
Selling, general, administrative, and other expenses increased 5.2% year over year to $61 million. It represented 4.8% of net sales in the reported quarter compared with 4.7% in the year-ago quarter. Research and development expenses were $4 million in the quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $296 million and adjusted EBITDA margin was 23%. Operating profits (excluding special items) increased 6.5% year over year to $229 million, whereas margin grew 40 basis points (bps) to 17.8%.
Net interest expenses in the quarter totaled $58 million, down 23.7% from the year-ago quarter. The adjusted tax rate in the reported quarter was 20.7%.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Howmet had cash and cash equivalents of $720 million, decreasing 0.6% from $724 million recorded in the last reported quarter. Long-term debt was $4,227 million, down1.1% from $4,272 million at the end of third-quarter 2021. In 2021, the company repaid debts worth $1,538 million, while repayments of the same totaled $700 million.
Reduction in debts in the year lowered annualized interest expenses by $70 million.
In 2021, Howmet generated net cash of $449 million from its operating activities compared with $9 million in the previous year. Capital spending totaled $199 million compared with $267 million in 2020. Adjusted free cash flow was $517 million in 2021.
The company paid out dividends of $19 million in 2021, increasing 72.7% from the previous year. Also, it repurchased 13.4 million shares worth $430 million in 2021, up from $73 million in 2020.
In January 2022, the repurchase of 3 million shares for $100 million has been executed by the company. Exiting the initial month of 2021, HWM is left to buyback $1.247 billion worth of shares. In addition, the company announced that it would pay a quarterly dividend of 2 cents per share to shareholders of record as of Feb 4, 2022, on Feb 25.
Outlook
For 2022, the company anticipates revenues of $5.56-$5.72 billion. The mid-point is currently pegged at $5.64 billion. Earnings (excluding special items) are expected to be $1.31-$1.43, with the mid-point at $1.37.
Adjusted EBITDA is expected to be $1.265-$1.335 billion for the year, with the mid-point of $1.3 billion. The EBITDA margin is projected at 22.8%-23.3%, the midpoint being 23%. Adjusted free cash flow is predicted to be $575-$675 million, with a mid-point of $625 million.
For the first quarter, the company anticipates revenues of $1.28-$1.32 billion, with the mid-point of $1.30 billion. Earnings (excluding special items) are expected to be 28-30 cents (the mid-point being 29 cents), while adjusted EBITDA is predicted to be $286-$304 million (the mid-point being $295 million).
Howmet Aerospace Inc. Price, Consensus and EPS Surprise
Howmet Aerospace Inc. price-consensus-eps-surprise-chart | Howmet Aerospace Inc. Quote
Zacks Rank & Other Important Earnings Releases
With a market capitalization of $13.3 billion, Howmet currently carries a Zacks Rank #4 (Sell).
Three other companies from the industry to report results in February are discussed below:
Jacobs Engineering Group Inc. (J - Free Report) will release fourth-quarter results on Feb 8, before market open. It presently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company reported better-than-expected results in the last four quarters, with an average earnings surprise of 12.71%. The Zacks Consensus Estimate for Jacobs fourth-quarter earnings is pegged at $1.61.
AECOM (ACM - Free Report) is slated to release first-quarter fiscal 2022 (ended December 2021) on Feb 7, after market close. It presently carries a Zacks Rank #3 (Hold).
In the last four quarters, the company recorded better-than-expected results in three and in-line results in one. It pulled off a trailing four-quarter earnings surprise of 4.09%, on average. The Zacks Consensus Estimate for AECOM’s fiscal first-quarter earnings is pegged at 77 cents.
Fluor Corporation (FLR - Free Report) presently carries a Zacks Rank #3. The company is slated to report fourth-quarter 2021 results on Feb 22, before market open.
The company reported better-than-expected results in three of the last four quarters and laggedin one. The earnings surprisefor the quarters is -73.34%, on average. The Zacks Consensus Estimate for Fluor’s fourth-quarter earnings is pegged at 28 cents.