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Howmet (HWM) Up 7.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Howmet (HWM - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Howmet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Howmet Aerospace reported mixed fourth-quarter 2021 results. The company’s earnings surpassed the Zacks Consensus Estimate by 3.45%, whereas sales lagged the same by 2.32%.
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 Aerospace’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 Aerospace’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 Aerospace’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, the company’s revenues increased 0.2%.
Howmet Aerospace 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 Aerospace’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 Aerospace 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 Aerospace 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, Howmet Aerospace is left to buyback $1.247 billion worth of shares.
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).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Howmet has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Howmet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Howmet (HWM) Up 7.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Howmet (HWM - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Howmet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Howmet Aerospace Tops Q4 Earnings Estimates, Gives Solid View
Howmet Aerospace reported mixed fourth-quarter 2021 results. The company’s earnings surpassed the Zacks Consensus Estimate by 3.45%, whereas sales lagged the same by 2.32%.
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 Aerospace’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 Aerospace’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 Aerospace’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, the company’s revenues increased 0.2%.
Howmet Aerospace 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 Aerospace’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 Aerospace 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 Aerospace 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, Howmet Aerospace is left to buyback $1.247 billion worth of shares.
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).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Howmet has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Howmet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.