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Howmet (HWM) to Benefit From Business Strength Amid Risks
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Howmet Aerospace Inc. (HWM - Free Report) is poised to benefit from strength across its end markets, focus on operational execution and effective pricing actions. The company’s Engine Products segment is benefiting from growth in the commercial and defense aerospace, industrial gas turbine, and oil and gas markets. Strong momentum in the commercial aerospace, transportation and general industrial end markets bodes well for the Fastening Systems segment.
Driven by strength in its business, Howmet issued a bullish guidance for 2024. The company expects revenues to increase approximately 7% in 2024 from the year-ago levels. Adjusted earnings per share are anticipated to be between $2.10 and $2.20, suggesting an increase of 17% at the mid-point in 2024.
The company remains committed to increasing shareholders’ value through dividend payment and share repurchases. For instance, in 2023, it paid dividends of $73 million and repurchased shares worth $250 million. In September 2023, HWM hiked its dividend by 25% to 5 cents per share.
HWM’s sound liquidity position adds to its strength. Exiting the fourth quarter of 2023, its cash and cash equivalents totaled $610 million and short-term debt obligations were $206 million. This implies that the company has sufficient cash to meet its current debt obligations.
Image Source: Zacks Investment Research
In the past six months, this Zacks Rank #3 (Hold) company has gained 45.8% compared with the industry’s 23.4% growth.
However, Howmet has been witnessing weakness in the Engineered Structures segment due to soft defense aerospace market primarily associated with F35 and legacy fighter programs. Persisting weakness is likely to be detrimental to the segment’s growth.
The company is also grappling with rising costs and expenses. In 2023, its cost of goods sold jumped 16.3% year over year to $4.8 billion due to increasing input costs. Also, selling, general and administrative, and other expenses increased 15.6% year over year in the same period due to higher employment costs and legal fees.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
The Zacks Consensus Estimate for WLDN’s 2024 sales and EPS indicates growth of 3.9% and 3.4%, respectively, from the year-ago levels.
Toll Brothers, Inc. (TOL - Free Report) currently sports a Zacks Rank of 1. TOL delivered a trailing four-quarter earnings surprise of 30.2%, on average.
The Zacks Consensus Estimate for TOL’s fiscal 2024 sales and EPS indicates growth of 0.6% and 11%, respectively, from a year ago.
Altair Engineering Inc. (ALTR - Free Report) currently carries a Zacks Rank #2 (Buy). ALTR delivered a trailing four-quarter earnings surprise of 107%, on average.
The Zacks Consensus Estimate for ALTR’s 2024 sales and EPS indicates growth of 8.5% and 10.6%, respectively, from the prior-year reported levels.
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Howmet (HWM) to Benefit From Business Strength Amid Risks
Howmet Aerospace Inc. (HWM - Free Report) is poised to benefit from strength across its end markets, focus on operational execution and effective pricing actions. The company’s Engine Products segment is benefiting from growth in the commercial and defense aerospace, industrial gas turbine, and oil and gas markets. Strong momentum in the commercial aerospace, transportation and general industrial end markets bodes well for the Fastening Systems segment.
Driven by strength in its business, Howmet issued a bullish guidance for 2024. The company expects revenues to increase approximately 7% in 2024 from the year-ago levels. Adjusted earnings per share are anticipated to be between $2.10 and $2.20, suggesting an increase of 17% at the mid-point in 2024.
The company remains committed to increasing shareholders’ value through dividend payment and share repurchases. For instance, in 2023, it paid dividends of $73 million and repurchased shares worth $250 million. In September 2023, HWM hiked its dividend by 25% to 5 cents per share.
HWM’s sound liquidity position adds to its strength. Exiting the fourth quarter of 2023, its cash and cash equivalents totaled $610 million and short-term debt obligations were $206 million. This implies that the company has sufficient cash to meet its current debt obligations.
Image Source: Zacks Investment Research
In the past six months, this Zacks Rank #3 (Hold) company has gained 45.8% compared with the industry’s 23.4% growth.
However, Howmet has been witnessing weakness in the Engineered Structures segment due to soft defense aerospace market primarily associated with F35 and legacy fighter programs. Persisting weakness is likely to be detrimental to the segment’s growth.
The company is also grappling with rising costs and expenses. In 2023, its cost of goods sold jumped 16.3% year over year to $4.8 billion due to increasing input costs. Also, selling, general and administrative, and other expenses increased 15.6% year over year in the same period due to higher employment costs and legal fees.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Willdan Group, Inc. (WLDN - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). WLDN delivered a trailing four-quarter average earnings surprise of a whopping 886.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WLDN’s 2024 sales and EPS indicates growth of 3.9% and 3.4%, respectively, from the year-ago levels.
Toll Brothers, Inc. (TOL - Free Report) currently sports a Zacks Rank of 1. TOL delivered a trailing four-quarter earnings surprise of 30.2%, on average.
The Zacks Consensus Estimate for TOL’s fiscal 2024 sales and EPS indicates growth of 0.6% and 11%, respectively, from a year ago.
Altair Engineering Inc. (ALTR - Free Report) currently carries a Zacks Rank #2 (Buy). ALTR delivered a trailing four-quarter earnings surprise of 107%, on average.
The Zacks Consensus Estimate for ALTR’s 2024 sales and EPS indicates growth of 8.5% and 10.6%, respectively, from the prior-year reported levels.