Howmet Aerospace Inc.’s (HWM Quick QuoteHWM - Free Report) third-quarter 2022 adjusted earnings of 36 cents per share matched the Zacks Consensus Estimate. The bottom line improved 33.3% year over year. On a sequential basis, Howmet’s bottom line increased 2.9% from 35 cents.

Total revenues of $1,433 million missed the Zacks Consensus Estimate of $1,438 million. The top line increased 11.7% from the year-ago quarter. The increase was backed by an improved commercial aerospace market and pricing actions. On a sequential basis, HWM’s revenues increased 2.9%.

Revenue Details

Howmet reports revenues under four segments. A brief discussion of the quarterly results is provided below.

Engine Products’ revenues totaled $683 million, representing 47.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 14%, driven by strength in the commercial aerospace, oil and gas volume as well as an increase in material cost pass-through.

The Fastening Systems segment generated revenues of $291 million, accounting for 20.3% of net revenues in the reported quarter. Revenues increased 15% year over year, driven by strength in commercial aerospace, partially offset by the decline in Boeing 787 production.

The Engineered Structures segment’s revenues, representing 13.5% of net revenues, decreased 3% year over year to $193 million. The results suffered due to the decline in the defense aerospace market and a decline in Boeing 787 production.

Forged Wheels revenues totaled $266 million, representing 18.6% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 15%, driven by an expanded volume, higher aluminum material and other inflationary cost pass-through, partially offset by an unfavorable forex movement.

Margin Profile

In the reported quarter, Howmet’s cost of goods sold increased 13.8% year over year to $1,056 million. It represented 73.7% of the reported quarter’s net sales compared with 72.3% in the year-ago quarter.

Selling, general, administrative and other expenses increased 4.3% year over year to $73 million. The metric represented 5.1% of net sales in the reported quarter compared with 5.5% in the year-ago quarter. Research and development expenses were $7 million in the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $323 million, while the adjusted EBITDA margin was 22.5%. Operating profits increased 11.2% year over year to $228 million, whereas a margin of 15.9% decreased 10 basis points from the year-ago reported figure.

Net interest expenses in the quarter totaled $57 million, down 9.5% from the year-ago quarter. The adjusted tax rate in the reported quarter was 23.6%.

Balance Sheet and Cash Flow

While exiting the third quarter of 2022, Howmet had cash and cash equivalents of $453 million, decreasing 37.1% from $720 million recorded in the fourth quarter of 2021. Long-term debt (less amount due within one year) was $4,170 million, down 1.3% from $4,227 million reported in the fourth quarter of 2021.

In the first nine months, Howmet generated net cash of $278 million from operating activities compared with $146 million generated in the year-ago period. Capital spending totaled $148 million compared with $138 million a year ago. Free cash flow was $130 million in the period.

Howmet paid out dividends of $27 million in the first nine months compared with $11 million in the year-ago period. Also, it repurchased shares worth $335 million in the first nine months compared with the $225-million buyback made a year ago.

Outlook

For 2022, Howmet anticipates revenues of $5.60-$5.65 billion compared with $5.64-$5.71 billion predicted earlier. The midpoint is currently pegged at $5.62 billion compared with the $5.68 billion stated earlier. Earnings (excluding special items) are expected to be $1.39-$1.41 per share compared with $1.38-$1.42 per share anticipated earlier. The midpoint is pegged at $1.40 compared with the $1.41 anticipated earlier.

Adjusted EBITDA is expected to be $1.265-$1.276 billion for the year compared with $1.276-$1.299 billion anticipated earlier, with the mid-point of $1.27 billion. The adjusted EBITDA margin is projected at 22.6%. Free cash flow is predicted to be $520-$580 million compared with $625-$675 million predicted earlier, with a midpoint of $560 million.

For the fourth quarter, Howmet anticipates revenues of $1.45-$1.5 billion, with a mid-point of $1.47 billion. Earnings (excluding special items) are expected to be 37-39 cents (the midpoint being 38 cents), while adjusted EBITDA is predicted to be $325-$336 million (the midpoint being $330 million).

Zacks Rank & Stocks to Consider

Howmet currently carries a Zacks Rank #3 (Hold).

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