Howmet Aerospace's stock headed for record high after earnings beat and raised guidance

By Ciara Linnane

Aircraft-parts maker boosts shareholder returns with buybacks and a 60% dividend hike

Howmet Aerospace Inc.'s stock soared 15% Tuesday to lead S&P 500 gainers after the maker of parts for airplanes posted better-than-expected second-quarter earnings, raised its full-year guidance and bolstered its shareholder returns program.

The stock (HWM) was also on track for a new record high above $90, exceeding the previous record close of $85.28 set on May 28.

Pittsburgh-based Howmet had net income of $266 million, or 65 cents a share, for the quarter, up from $193 million, or 46 cents a share, in the year-earlier period. Excluding one-time items, adjusted earnings per share came to 67 cents, ahead of the 60-cent FactSet consensus.

Sales rose to $1.88 billion from $1.648 billion a year ago, also ahead of the $1.834 billion FactSet consensus.

"The outlook for commercial aerospace continues to be robust, with strong travel demand and an aging aircraft fleet, leading to an extremely high backlog at the aircraft OEMs," Chief Executive John Plant said in prepared remarks, referring to original equipment manufacturers.

"The issue faced by Howmet Aerospace continues to be the aircraft manufacturers' ability to build and deliver aircraft on a consistent basis," he said. Despite that challenge, the company raised guidance for all metrics to reflect the strong quarter, he said.

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Howmet is now expecting third-quarter adjusted EPS of 63 cents to 65 cents and revenue ranging from $1.845 billion to $1.865 billion. The FactSet consensus is for EPS of 60 cents and sales of $1.862 billion.

For the full year, Howmet expects adjusted EPS of $2.53 to $2.57 on sales of $7.4 billion to $7.48 billion. The FactSet consensus is for EPS of $2.39 on sales of $7.322 billion.

The company's new stock-buyback authorization stands at $2.487 billion. It raised its quarterly dividend by 60% to 8 cents a share from 5 cents, with the new payment to be made Aug. 26 to shareholders of record as of Aug. 9.

The board has also approved a 2025 dividend policy equal to 15% plus or minus 5% of net income excluding special items.

By segment, engine-products sales rose to $933 million from $821 million, driven by growth in the commercial aerospace, defense aerospace, oil and gas, and industrial gas-turbine markets.

Sales in the fastening-systems segment rose 20% to $394 million from $329 million a year ago. Growth was mostly due to the commercial aerospace market, including wide-body aircraft recovery.

Engineered-structures sales rose 38% to $275 million, driven by growth in the commercial aerospace market, including wide-body aircraft recovery, and the defense aerospace market.

Sales in the forged-wheels segment fell 7% to $278 million due to lower volumes in commercial transportation and a decline in aluminum and other inflationary costs.

Howmet was separated from aluminum maker Arconic Inc. in 2020.

The stock has gained 73% in the year to date, while the S&P 500 SPX has gained 14%.

-Ciara Linnane

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07-30-24 1141ET

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