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Howmet (HWM) Up 23% in 6 Months: Will the Momentum Continue?
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Shares of Howmet Aerospace (HWM - Free Report) have rallied approximately 23% in the past six months, outperforming the industry’s 3.3% increase. The recovery in commercial aerospace end market and strength in commercial transportation primarily drove the stock higher.
Image Source: Zacks Investment Research
Howmet is benefiting from continued recovery in the commercial aerospace end market, owing to a recovery in the narrow body. Revenues from commercial aerospace jumped 23% year over year in the third quarter.
Strength in the commercial aerospace market is driving revenues at the Engine Products (up 14% year over year in the third quarter) and Fastening Systems (up 15% year over year) segments. Strength in commercial transportation due to higher aluminum prices and volumes is aiding the Forged Wheels (revenues up 15% year over year in the third quarter) segment.
Howmet expects the commercial aerospace recovery to continue, backed by improvement in narrow body production rates. This is expected to drive performance in the fourth quarter of 2022.
Thanks to the strength in its operations, HWM’s upbeat guidance for the fourth quarter of 2022 and the full year is encouraging. For the fourth quarter, the company expects revenues of $1.45-$1.5 billion. The mid-point of the guided range — $1.47 billion — is higher than $1.285 billion reported in the year-ago period. Adjusted earnings are expected to be 37-39 cents per share. The mid-point of the guided range — 38 cents — is higher than 30 cents reported in the year-ago period.
For the full year, Howmet estimates revenues of $5.60-$5.65 billion. The mid-point of the guided range — $5.62 billion — is higher than $4.972 billion reported in 2021. Adjusted earnings are predicted to be $1.39-$1.41 per share. The mid-point of the guided range — $1.40 — is higher than $1.01 reported in the year-ago period.
Howmet’s shareholder-friendly measures are also expected to have boosted its shares. The company paid out dividends of $27 million in the first nine months of 2022 compared with $11 million in the year-ago period. Also, it repurchased shares worth $335 million in the first nine months of 2022 compared with the $225 million buyback made a year ago.
Will the Momentum Continue?
In 2023, Howmet is likely to get some respite from supply-chain disruptions and high raw material costs. Easing supply-chain disruptions are expected to support volumes and commercial truck production in the commercial transportation end market, thus fostering HWM’s growth.
The Federal Reserve’s indication to slow down the pace of interest rate hikes in 2023 is expected to lower raw material costs. This should bring about some improvement in HWM’s margins, which have been under pressure due to high raw material costs.
ChampionX has an estimated earnings growth rate of 105% and 46.3% for 2022 and 2023, respectively. Shares of CHX have rallied 37.4% in the past six months.
Sterling Infrastructure (STRL - Free Report) presently flaunts a Zacks Rank #1. The company delivered a four-quarter earnings surprise of 20%, on average.
Sterling Infrastructure has an estimated earnings growth rate of 46% and 8.6% for 2022 and 2023, respectively. Shares of STRL have increased 42.8% in the past six months.
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Howmet (HWM) Up 23% in 6 Months: Will the Momentum Continue?
Shares of Howmet Aerospace (HWM - Free Report) have rallied approximately 23% in the past six months, outperforming the industry’s 3.3% increase. The recovery in commercial aerospace end market and strength in commercial transportation primarily drove the stock higher.
Image Source: Zacks Investment Research
Howmet is benefiting from continued recovery in the commercial aerospace end market, owing to a recovery in the narrow body. Revenues from commercial aerospace jumped 23% year over year in the third quarter.
Strength in the commercial aerospace market is driving revenues at the Engine Products (up 14% year over year in the third quarter) and Fastening Systems (up 15% year over year) segments. Strength in commercial transportation due to higher aluminum prices and volumes is aiding the Forged Wheels (revenues up 15% year over year in the third quarter) segment.
Howmet expects the commercial aerospace recovery to continue, backed by improvement in narrow body production rates. This is expected to drive performance in the fourth quarter of 2022.
Thanks to the strength in its operations, HWM’s upbeat guidance for the fourth quarter of 2022 and the full year is encouraging. For the fourth quarter, the company expects revenues of $1.45-$1.5 billion. The mid-point of the guided range — $1.47 billion — is higher than $1.285 billion reported in the year-ago period. Adjusted earnings are expected to be 37-39 cents per share. The mid-point of the guided range — 38 cents — is higher than 30 cents reported in the year-ago period.
For the full year, Howmet estimates revenues of $5.60-$5.65 billion. The mid-point of the guided range — $5.62 billion — is higher than $4.972 billion reported in 2021. Adjusted earnings are predicted to be $1.39-$1.41 per share. The mid-point of the guided range — $1.40 — is higher than $1.01 reported in the year-ago period.
Howmet’s shareholder-friendly measures are also expected to have boosted its shares. The company paid out dividends of $27 million in the first nine months of 2022 compared with $11 million in the year-ago period. Also, it repurchased shares worth $335 million in the first nine months of 2022 compared with the $225 million buyback made a year ago.
Will the Momentum Continue?
In 2023, Howmet is likely to get some respite from supply-chain disruptions and high raw material costs. Easing supply-chain disruptions are expected to support volumes and commercial truck production in the commercial transportation end market, thus fostering HWM’s growth.
The Federal Reserve’s indication to slow down the pace of interest rate hikes in 2023 is expected to lower raw material costs. This should bring about some improvement in HWM’s margins, which have been under pressure due to high raw material costs.
Zacks Rank & Key Picks
Howmet presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Engineering - R and D Services industry are as follows:
ChampionX (CHX - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 9.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
ChampionX has an estimated earnings growth rate of 105% and 46.3% for 2022 and 2023, respectively. Shares of CHX have rallied 37.4% in the past six months.
Sterling Infrastructure (STRL - Free Report) presently flaunts a Zacks Rank #1. The company delivered a four-quarter earnings surprise of 20%, on average.
Sterling Infrastructure has an estimated earnings growth rate of 46% and 8.6% for 2022 and 2023, respectively. Shares of STRL have increased 42.8% in the past six months.