Here's Why Hold Strategy is Apt for Howmet (HWM) Stock Now
Howmet Aerospace HWM is backed by multiple tailwinds despite adversities from raw material cost inflation and supply chain issues.
Key Factors Aiding the Stock
Commercial Aerospace Market Strength: Continued strength across the commercial aerospace market is a key catalyst to this Zacks Rank #3 (Hold) company’s growth. Commercial aerospace revenues (up 23% year over year in the second quarter) increased for nine consecutive quarters. Widebody recovery and a strong backlog of commercial aircraft orders and spares growth are expected to continue driving commercial aerospace revenues in 2023. Apart from commercial aerospace, the company is also seeing steady demand across commercial transportation, defense aerospace and industrial markets.
Business Strength: Howmet’s Engine products segment (revenues up 26% year over year in the second quarter) is benefiting from growth in commercial aerospace and defense aerospace markets owing to higher build rates and increased spares. Within the Fastening Systems segment (revenues up 19% in the second quarter), widebody recovery is driving commercial aerospace revenues. Strength in defense aerospace and general industrial also bodes well for the segment. The Engineered Structures segment (revenues up 8% in the second quarter) is also buoyed by higher commercial aerospace revenues. Despite supply-chain disruptions, higher volumes drove Forged Wheels revenues by 7% year over year in the second quarter.
Improved 2023 Guidance: Amid a strong backlog of commercial aircraft orders at both Boeing and Airbus and strength in the defense market, Howmet has raised its 2023 guidance. The company now expects revenues in the range of $6.400-$6.470 billion compared with $6.200-$6.325 billion anticipated earlier. In 2022, the company reported revenues of $5.7 billion. Adjusted earnings per share are forecasted to be in the band of $1.69-$1.71 compared with $1.65-$1.70 predicted earlier. In 2022, the company reported adjusted earnings of $1.11 per share.
Shareholder-Friendly Policies: Howmet has been committed to rewarding its shareholders through dividends and share buybacks. The company paid out dividends of $44 million in 2022, compared with $19 million in the year-ago period. In the first half of 2023, the company paid dividends of $35 million and repurchased shares worth $125 million. HWM expects to hike its dividend by 25% to 5 cents per share in the fourth quarter.
Price Performance
Amid the abovementioned positives, shares of Howmet have outperformed its industry in the year-to-date period. The stock has gained approximately 24% so far this year compared with the industry’s 21.8% increase.
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Key Picks
Some better-ranked stocks within the Construction sector are as follows:
Sterling Infrastructure, Inc. STRL sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 14.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sterling Infrastructure has an estimated earnings growth rate of 29.4% for the current year. The stock has surged more than 100% so far this year.
Willdan Group WLDN flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 1,350.6%, on average.
Willdan Group has an estimated earnings growth rate of 50% for the current year. The stock has gained 26.1% so far this year.
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Willdan Group, Inc. (WLDN) : Free Stock Analysis Report
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Howmet Aerospace Inc. (HWM) : Free Stock Analysis Report
