Howmet (HWM) Beats Q3 Earnings Estimates, Raises 2023 View
Howmet Aerospace Inc.’s HWM third-quarter 2023 adjusted earnings of 45 cents per share beat the Zacks Consensus Estimate of adjusted earnings of 43 cents per share. The bottom line improved 4.7% year over year.
Total revenues of $1,658 million surpassed the consensus estimate of $1,599 million. The top line increased 15.7% from the year-ago quarter. The increase was backed by an improved commercial aerospace market.
Segmental Details
The Engine Products segment’s revenues totaled $798 million, representing 48.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 17%, driven by growth in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets. The Zacks Consensus Estimate for Engine Products revenues was pegged at $801 million.
The Fastening Systems segment generated revenues of $348 million, accounting for 21% of net revenues in the reported quarter. Revenues increased 20% year over year, driven by growth in the commercial aerospace market, including emerging wide body recovery, and growth in the commercial transportation market. The consensus estimate for Fastening Systems’ revenues was pegged at $321 million.
The Engineered Structures segment’s revenues, representing 13.7% of net revenues, increased 18% year over year to $227 million. The results benefited from growth in commercial aerospace market, driven by Russian titanium share gains and emerging wide body recovery. The Zacks Consensus Estimate for Engineered Structures’ revenues was pegged at $215 million.
The Forged Wheels segment’s revenues totaled $285 million, representing 17.2% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 7%, driven by growth in the commercial transportation market. The consensus estimate for Forged Wheels’ revenues was pegged at $260 million.
Howmet Aerospace Inc. Price, Consensus and EPS Surprise
Howmet Aerospace Inc. price-consensus-eps-surprise-chart | Howmet Aerospace Inc. Quote
Margin Profile
In the reported quarter, Howmet’s cost of goods sold increased 12% year over year to $1,183 million. Selling, general, administrative and other expenses increased 19.2% year over year to $87 million. Research and development expenses were $9 million.
Adjusted EBITDA, excluding special items, in the reported quarter was $297 million, down 21.6% year over year. Adjusted EBITDA margin decreased 50 basis points year over year to 22.5%. Operating income decreased 25.7% year over year to $228 million. The operating income margin in the quarter was 15.9%, down 260 basis points year over year. Net interest expenses totaled $57 million, up 5.6% from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter of 2023, Howmet had cash and cash equivalents of $424 million compared with $791 million at the end of December 2022. Long-term debt (less amount due within one year) was $3,794 million compared with $4,162 million at the end of fourth-quarter 2022.
In the first nine months of 2023, Howmet generated net cash of $443 million from operating activities compared with $278 million generated in the year-ago period. Capital spending totaled $164 million compared with $148 million spent a year ago. Free cash flow was $132 million in the period.
Howmet paid out dividends of $77 million in the first nine months of 2023 compared with $23 million in the year-ago period. Also, it repurchased shares worth $150 million in the year compared with the $335 million buyback made a year ago.
Q4 Outlook
For the fourth quarter of 2023, Howmet expects revenues to be $1.62-$1.65 billion. The midpoint of the guided range — $1.63 billion — is in line with the Zacks Consensus Estimate. Adjusted EBITDA is expected to be between $370 million and $380 million, while the margin is anticipated to be 22.8-23.0%. Adjusted earnings per share are estimated to be 44-46 cents. The midpoint of the guided range — 45 cents — lies above the consensus estimate of adjusted earnings per share of 44 cents.
2023 Outlook Revised
The company has raised its guidance for 2023. Howmet now predicts revenues to be $6.530-$6.560 billion compared with $6.400-$6.470 billion predicted earlier. The Zacks Consensus Estimate for the same is $6.47 billion. Adjusted EBITDA is estimated to be $1.480-$1.490 billion compared with $1.435-$1.455 billion anticipated earlier. The margin is projected to be 22.7% compared with 22.4-22.5% predicted earlier.
Adjusted earnings per share are forecasted in the band of $1.76-$1.78 compared with $1.69-$1.71 predicted earlier. The Zacks Consensus Estimate of adjusted earnings per share is $1.73. Free cash flow is expected to be $600-$670 million for 2023.
Zacks Rank & Stocks to Consider
Howmet currently carries a Zacks Rank #4 (Sell). Some better-ranked companies are discussed below:
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 24.2% in the past year.
Axon Enterprise, Inc. AXON currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 40.5% in the past year.
Caterpillar Inc. CAT presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 16.6%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 5.7% in the past year.
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Howmet Aerospace Inc. (HWM) : Free Stock Analysis Report
