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Howmet Faces Softness in Commercial Transportation Market: Recovery Ahead?
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Key Takeaways
Commercial transportation weakness persists: revenues down 4% YoY in Q2 2025, following a 14% drop in Q1.
Headwinds from lower truck builds, tariff-related issues and economic uncertainty might weigh on H2 results.
COGS rose 7.3% in 2024 and 3% in H1 2025 due to higher aluminum prices and supply-chain volatility.
Howmet Aerospace Inc. (HWM - Free Report) is witnessing persistent weakness in its commercial transportation market. After witnessing a 14% decline in first-quarter 2025, revenues from the commercial transportation market fell 4% in the second quarter on a year-over-year basis. The drop was primarily due to softer OEM builds, particularly in the Forged Wheels segment. Management expects this weakness to persist through the second half of the year. Also, lower commercial truck builds, owing to tariff-related and economic uncertainty in North America, have been weighing on the company’s near-term performance.
Supply-chain volatility, along with tariff-related headwinds, has caused delays and higher aluminum costs over recent quarters. The company’s cost of goods sold increased 7.3% and 3% year over year in 2024 and the first six months of 2025, respectively, due to increasing input costs. Supply-chain challenges and ongoing tariff-related uncertainty in the transportation sector are expected to continue impacting HWM’s delivery of finished products and operational costs.
Nevertheless, solid momentum in the commercial and defense aerospace markets continues to support Howmet’s performance. Robust orders for engine spares for the F-35 program, aerospace fastening systems and airframe structural components augur well for the company.
Segment Snapshot of HWM’s Peers
As one of HWM’s peers, Kennametal Inc. (KMT - Free Report) is witnessing softness in the Metal Cutting segment. The decrease in demand across the transportation end market, owing to continued OEM production weakness, mainly in Europe, the Middle East & Africa regions, is affecting the Metal Cutting segment’s organic revenues (which decreased 4% year over year in the fourth quarter of fiscal 2025).
GE Aerospace (GE - Free Report) is witnessing strong demand for LEAP, GEnx & GE9X engines and services within the Commercial Engines & Services business. GE Aerospace’s growth is also supported by increasing air traffic, fleet renewal and expansion activities. During the second quarter of 2025, GE Aerospace inked a deal with Qatar Airways to supply more than 400 GE9X and GEnx engines. It represents the largest widebody engine deal in the company’s history.
HWM's Price Performance, Valuation and Estimates
Shares of Howmet have surged 34% in the past six months compared with the industry’s growth of 20.5%.
Image Source: Zacks Investment Research
From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 43.51X, above the industry’s average of 28.19X. Howmet carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HWM’s earnings has been on the rise over the past 60 days.
Image: Bigstock
Howmet Faces Softness in Commercial Transportation Market: Recovery Ahead?
Key Takeaways
Howmet Aerospace Inc. (HWM - Free Report) is witnessing persistent weakness in its commercial transportation market. After witnessing a 14% decline in first-quarter 2025, revenues from the commercial transportation market fell 4% in the second quarter on a year-over-year basis. The drop was primarily due to softer OEM builds, particularly in the Forged Wheels segment. Management expects this weakness to persist through the second half of the year. Also, lower commercial truck builds, owing to tariff-related and economic uncertainty in North America, have been weighing on the company’s near-term performance.
Supply-chain volatility, along with tariff-related headwinds, has caused delays and higher aluminum costs over recent quarters. The company’s cost of goods sold increased 7.3% and 3% year over year in 2024 and the first six months of 2025, respectively, due to increasing input costs. Supply-chain challenges and ongoing tariff-related uncertainty in the transportation sector are expected to continue impacting HWM’s delivery of finished products and operational costs.
Nevertheless, solid momentum in the commercial and defense aerospace markets continues to support Howmet’s performance. Robust orders for engine spares for the F-35 program, aerospace fastening systems and airframe structural components augur well for the company.
Segment Snapshot of HWM’s Peers
As one of HWM’s peers, Kennametal Inc. (KMT - Free Report) is witnessing softness in the Metal Cutting segment. The decrease in demand across the transportation end market, owing to continued OEM production weakness, mainly in Europe, the Middle East & Africa regions, is affecting the Metal Cutting segment’s organic revenues (which decreased 4% year over year in the fourth quarter of fiscal 2025).
GE Aerospace (GE - Free Report) is witnessing strong demand for LEAP, GEnx & GE9X engines and services within the Commercial Engines & Services business. GE Aerospace’s growth is also supported by increasing air traffic, fleet renewal and expansion activities. During the second quarter of 2025, GE Aerospace inked a deal with Qatar Airways to supply more than 400 GE9X and GEnx engines. It represents the largest widebody engine deal in the company’s history.
HWM's Price Performance, Valuation and Estimates
Shares of Howmet have surged 34% in the past six months compared with the industry’s growth of 20.5%.
Image Source: Zacks Investment Research
From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 43.51X, above the industry’s average of 28.19X. Howmet carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HWM’s earnings has been on the rise over the past 60 days.
Image Source: Zacks Investment Research
The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.