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Howmet (HWM) Up 31% in 6 Months: Will the Momentum Continue?
Shares of Howmet Aerospace (HWM - Free Report) have rallied 30.5% in the past six months, outperforming the industry’s 26.8% increase. The upsurge can be attributed to continued recovery in the commercial aerospace end market. Revenues from commercial aerospace jumped 29% year over year in the fourth quarter. Pricing actions are driving the company’s top line.
Image Source: Zacks Investment Research
Strength in the commercial aerospace, defense aerospace and oil and gas end markets and pricing actions are driving revenues at the Howmet Engine Products segment (up 21% year over year in the fourth quarter). Robust commercial aerospace and narrow body recovery are supporting the Fastening Systems segment (up 11% year over year in the fourth quarter).
Strength in commercial transportation due to higher aluminum prices and volumes is aiding HWM’s Forged Wheels segment (revenues up 14% year over year in the fourth quarter). Narrow body commercial aerospace market and pricing actions are supporting the Engineered Structures segment (up 21% year over year in the fourth quarter).
Amid buoyant market conditions, Howmet’s upbeat guidance for the first quarter and full-year 2023 holds promise. For the first quarter, the company expects revenues of $1.475-$1.525 billion. The mid-point of the guided range — $1.5 billion — is higher than the $1.324 billion reported in the year-ago period. Adjusted earnings are expected to be 35-39 per share. The mid-point of the guided range — 37 cents — is higher than the 31 cents reported in the year-ago period.
For the full year, Howmet estimates revenues of $6.0-$6.2 billion. The mid-point of the guided range — $6.1 billion — is higher than the $5.7 billion reported in 2022. Adjusted earnings are predicted to be $1.53-$1.67 per share. The mid-point of the guided range — $1.60 — is higher than the $1.11 reported in the year-ago period.
Continued recovery in commercial aerospace, backed by improvement in narrow body production rates, should continue to drive HWM’s performance in 2023. Easing supply chain disruptions and an anticipated reduction in raw material costs due to deceleration in inflation are other tailwinds for the company in 2023.
Zacks Rank & Key Picks
Howmet currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are as follows:
Altair Engineering (ALTR - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 136%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Altair Engineering has an estimated earnings growth rate of 11.2% for the current year. The stock has rallied 50% in the past six months.
Sterling Infrastructure, Inc. (STRL - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 19.3%, on average.
Sterling Infrastructure has an estimated earnings growth rate of 11% for the current year. The stock has surged 81.5% in the past six months.