Howmet Aerospace Inc.’s (HWM Quick QuoteHWM - Free Report) second-quarter 2023 adjusted earnings of 44 cents per share beat the Zacks Consensus Estimate of adjusted earnings of 43 cents per share. The bottom line improved 25.7% year over year.

Total revenues of $1,648 million surpassed the consensus estimate of $1,609 million. The top line increased 18.3% from the year-ago quarter. The increase was backed by an improved commercial aerospace market.

Segmental Details

The Engine Products segment’s revenues totaled $821 million, representing 49.8% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 26%, driven by growth in commercial aerospace, defense aerospace, industrial gas turbine, and oil and gas markets. The Zacks Consensus Estimate for Engine Products revenues was pegged at $791 million.

The Fastening Systems segment generated revenues of $329 million, accounting for 20% of net revenues in the reported quarter. Revenues increased 19% year over year, driven by growth in the commercial aerospace, defense aerospace, industrial, and commercial transportation end markets. The consensus estimate for Fastening Systems’ revenues was pegged at $313 million.

The Engineered Structures segment’s revenues, representing 12.1% of net revenues, increased 8% year over year to $200 million. The results benefited from growth in the commercial aerospace market driven by Russian titanium share gains, partially offset by declines in the defense aerospace market. The Zacks Consensus Estimate for Engineered Structures’ revenues was pegged at $216 million.

The Forged Wheels segment’s revenues totaled $298 million, representing 18.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 7%, driven by an increase in volume. The consensus estimate for Forged Wheels’ revenues was pegged at $288 million.

Margin Profile

In the reported quarter, Howmet’s cost of goods sold increased 21.2% year over year to $1,196 million. Selling, general, administrative and other expenses increased 8.7% year over year to $75 million. Research and development expenses were $9 million in the quarter.

Adjusted EBITDA, excluding special items, in the reported quarter was $317 million, down 13.9% year over year. Adjusted EBITDA margin increased 50 basis points year over year to 22.8%. Operating income increased 18.3% year over year to $285 million. The operating income margin in the quarter was 17.3%, in line with year-ago reported number. Net interest expenses in the quarter totaled $55 million, down 3.5% from the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the second quarter of 2023, Howmet had cash and cash equivalents of $535 million, compared with $791 million at the end of December 2022. Long-term debt (less amount due within one year) was $3,989 million, compared with $4,162 million at the end of fourth-quarter 2022.

In the first six months of 2023, Howmet generated net cash of $252 million from operating activities, compared with $213 million generated in the year-ago period. Capital spending totaled $105 million, almost in line with $106 million spent a year ago. Free cash flow was $147 million in the period.

Howmet paid out dividends of $35 million in the first six months of 2023, compared with $18 million in the year-ago period. Also, it repurchased shares worth $125 million in the year, compared with the $235 million buyback made a year ago.

Q3 Outlook

For the third quarter of 2023, Howmet expects revenues of $1.58-$1.60 billion. The Zacks Consensus Estimate for the same stands at $1.56 billion. Adjusted EBITDA is expected to be between $355 million and $365 million, while the margin is anticipated to be 22.5-22.8%. Adjusted earnings per share is estimated to be 41-43 cents in the third quarter. The midpoint of the guided range — 42 cents — is in line with the consensus estimate of adjusted earnings per share of 42 cents.

2023 Outlook

The company has raised its guidance for 2023. Howmet now predicts revenues to be $6.400-$6.470 billion, compared with $6.200-$6.325 billion predicted earlier. The Zacks Consensus Estimate for the same stands at $6.38 billion. Adjusted EBITDA is estimated to be $1.435-$1.455 billion, compared with $1.400-$1.435 billion anticipated earlier, while the margin is projected to be 22.4-22.5%, compared with 22.6-22.7% predicted earlier.

Adjusted earnings per share is forecasted in the band of $1.69-$1.71, compared with $1.65-$1.70 predicted earlier. The midpoint of the guided range — $1.70 — lies below the Zacks Consensus Estimate of adjusted earnings per share of $1.71. Free cash flow is expected to be $600-$670 million for 2023.

Zacks Rank & Other Stocks to Consider

HWM currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Construction sector are discussed below:

Beazer Homes USA, Inc. (BZH Quick QuoteBZH - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.

The company delivered a trailing four-quarter earnings surprise of 29.6%, on average. In the past 60 days, estimates for Beazer Homes’ fiscal 2023 (ending September 2023) earnings have increased 20.3%. The stock has gained 98% in the past six months.

TopBuild Corp. (BLD Quick QuoteBLD - Free Report) presently carries a Zacks Rank of 2. BLD’s earnings surprise in the last four quarters was 12.9%, on average.

In the past 60 days, estimates for TopBuild’s 2023 earnings have increased 2.8%. The stock has rallied 31.4% in the past six months.