Howmet Aerospace (NYSE: $HWM) soared 15% on Tuesday after the airplane parts maker posted better-than-expect second quarter results.
Howmet Soars After Second Quarter Results
The jet engine parts and aluminum wheels maker for large trucks posted better than expected revenue and profits in the second. Howmet, one of Boeing’s main suppliers, also raised its full-year guidance on rising demand in the commercial aerospace sector.
Howmet reported revenue of $1.88 billion, a 14% YoY rise, beating estimates of $1.83 billion. It reported $0.65 in earnings per share for the second quarter, beating Zacks forecast of $0.60. The strong performance was driven by the strong performance of commercial aerospace sales, which were up 27% YoY.
The company also saw a huge improvement in margins, with adjusted EBITDA margin up 340 basis points YoY to 25.7%. Meanwhile, the Operating income margin rose to 21.2% from 17.3% the previous year.
The second quarter’s net income was $266 million, a 37.82% increase YoY from the $193 million reported the previous year.
Howmet Raises Guidance
For the third quarter, Howmet expects revenue of $1.85B to $1.87B. The company also raised its full-year to $7.4B to $7.48B from its previous forecast of $7.22B to $7.37B. Its new forecast is above Zacks estimate of $7.34 billion at the midpoint.
It ended the second quarter with free cash flow of $342 million and forecast it will have free cash flow of $840M to $900M.
Other Highlights
Howmet announced that it had bought back $60 million shares at an average price of $81.66 during the second quarter. It also announced that on July 30, 2024, the board had approved an increase to its share buyback program by $2 billion to $2.487 billion.
The board also approved a dividend of $0.08 per share for shareholders of record as of August 9, 2024. It marks a dividend increase of 60% from the previous payout of $0.05 per share. Additionally, the board approved a new dividend policy for 2025 of 15% plus or minus 5% of the adjusted net income.
HWM Stock Soars On Positive Results
Following the positive results, HWM stock closed trading on Tuesday, July 30, 2024, at $93.81, a new record close for the stock. It has now exceeded its previous record close of $85.28, which was set on May 28, 2024. On Wednesday, during the morning trading session, the stock dipped slightly by 0.68% to $93.17.
The stock has had a great run in 2024, rising 74.60% year to date. Over the past 12 months, it has risen 83.44%. Its last closing price is above its 50 and 200 day moving averages of $81.53, and $64.71, respectively.
What Analysts Think
Analysts give HWM stock an overall strong buy rating. They forecast a wide range for the stock, with a high of $102 and a low of $70. Their average forecast of $88.44 represents a 5.72% downside, signaling that the stock could experience a slight correction after Tuesday’s record close.
Is Howmet Aerospace A Buy In The Third Quarter Of 2024
If you are considering adding HWM to your portfolio, some factors could potentially affect its future price. One major one is Being (BA). The company is reducing orders for engines and parts, raising concerns about inventory liquidation. The commercial truck sector has also slowed down, especially in Europe.
However, Howmet also has several factors that are working in its favor. Airbus has increased orders for parts, although at a low rate. The defense sector is one of Howmet’s main strengths. It is expected to see a double-digit rise in demand for engine spares for fighters and new orders for Howitzers.
There could also be an increased demand for industrial gas turbines, driven by rising demand for electricity due to data centers and AI chips. Howmet is the biggest supplier of turbine blades, and it adds to boost production capacity in 2025.
Based on the raised outlook and current blazing stock performance, HWM could potentially be one of the best stocks to hold in the third quarter of 2024.
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