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Howmet (HWM) Gains 9.4% in Six Months: More Room to Rally?

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Howmet Aerospace Inc.’s (HWM - Free Report) performance appears in good shape, with its shares having rallied 9.4% in the past six months. Strength across its businesses, healthy liquidity position, solid product portfolio and a sound capital-deployment strategy led to the positive market sentiments around the stock.

This Pittsburgh, PA-based player, with a $13.5-billion market capitalization, belongs to the Zacks Engineering - R and D Services industry. Howmet currently has a Zacks Rank #2 (Buy).

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In the past six months, shares of Howmet have outperformed its industry’s decline of 8.6% and the S&P 500’s decrease of 19.8%.

Factors Favoring the Stock

Howmet is poised to gain from its presence in the diverse end markets, which allows it to offset risks associated with a single market. Strength in the end markets like commercial transportation, aerospace-defense, aerospace-commercial, general industrial, industrial gas turbine and others will likely benefit HWM in the near term. It saw year-over-year revenue growth of 10% from commercial transportation and 29% from commercial aerospace in the first quarter of 2022. Its second-quarter revenues are anticipated in the range of $1.35-$1.39 billion.

Howmet’s robust product portfolio, effective pricing policies and cost-reduction efforts are likely to drive its performance over time. Howmet predicts earnings (excluding special items) of $1.33-$1.45, with the midpoint at $1.39, for 2022. The second-quarter 2022 earnings are anticipated to be 31-33 cents per share.

Solid liquidity position has been aiding HWM over time. Exiting first-quarter 2022, Howmet’s available cash balance was $522 million. Howmet also had a revolving credit facility of $1 billion (set to mature in September 2026) exiting the quarter. HWM anticipates an adjusted free cash flow of $575-$675 million for 2022.

Howmet remains committed to rewarding its shareholders through share repurchases and dividend payouts. In first-quarter 2022, HWM repurchased 5 million shares for $175 million and paid out dividends of $9 million to its shareholders. Also, HWM repurchased 3 million shares for $100 million in January 2022.

The Zacks Consensus Estimate for Howmet’s 2022 earnings of $1.41 has been revised 2.2% upward from the 60-day-ago figure. The consensus estimate for 2023 earnings stands at $1.82, having moved 1.1% north over the same time frame.

Zacks Rank & Stocks to Consider

Some other top-ranked companies from the Construction sector are discussed below:

Century Communities, Inc. (CCS - Free Report) presently has a Zacks Rank #1 (Strong Buy). CCS delivered a trailing four-quarter earnings surprise of 18.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here..

CCS’s earnings estimates have increased 13.8% for 2022 in the past 60 days. Its shares have declined 40.9% in the past six months.

Comfort Systems USA, Inc. (FIX - Free Report) presently has a Zacks Rank of 2. Its earnings surprise in the last four quarters was 4.8%, on average.

In the past 60 days, FIX’s earnings estimates have increased 13.8% for 2022. The stock has declined 11.2% in the past six months.

Granite Construction Incorporated (GVA - Free Report) is presently Zacks #2 Ranked. GVA’s earnings surprise in the last four quarters was 10.7%, on average.

In the past 60 days, the stock’s earnings estimates have increased 7.1% for 2022. The same has declined 20.9% in the past six months.