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Howmet (HWM) Down 9.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Howmet (HWM - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Howmet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Howmet Q4 Earnings Meet, Surge Y/Y on Higher Revenues
Howmet fourth-quarter 2022 adjusted earnings (excluding 12 cents from non-recurring items) of 38 cents per share matched the Zacks Consensus Estimate. The bottom line improved 26.7% year over year.
Total revenues of $1,513 million surpassed the Zacks Consensus Estimate of $1,471.7 million. The top line increased 17.7% from the year-ago quarter. The increase was backed by an improved commercial aerospace market and pricing actions.
Segmental Details
Engine Products’ revenues totaled $732 million, representing 48.4% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 21%, driven by strength in commercial aerospace, defense aerospace and oil and gas markets and pricing actions.
The Fastening Systems segment generated revenues of $285 million, accounting for 18.8% of net revenues in the reported quarter. Revenues increased 11% year over year, driven by strength in commercial aerospace and narrow body recovery as well as pricing actions.
The Engineered Structures segment’s revenues, representing 15.2% of net revenues, increased 21% year over year to $230 million. The results benefited from narrow body commercial aerospace market and pricing actions partly offset by Boeing 787 production declines.
Forged Wheels revenues totaled $266 million, representing 17.6% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 14%, driven by pricing actions and an increase in volumes, partially offset by forex woes.
Margin Profile
In the reported quarter, Howmet’s cost of goods sold increased 18.3% year over year to $1,110 million. Selling, general, administrative and other expenses increased 3.3% year over year to $63 million. Research and development expenses were $9 million in the quarter.
EBITDA, excluding special items, in the reported quarter was $336 million, up 14% year over year. Adjusted EBITDA margin decreased approximately 80 basis points (bps) year over year to 22.2%. Operating income increased 49.7% year over year to $220 million. Operating income margin increased approximately 310 bps year over year to 14.5% in the reported quarter. Net interest expenses in the quarter totaled $57 million, down 1.7% from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2022, Howmet had cash and cash equivalents of $791 million compared with $720 million at the end of the year-ago period. Long-term debt (less amount due within one year) was $4,162 million compared with $4,227 million in the year-ago period.
In 2022, Howmet generated net cash of $733 million from operating activities compared with $449 million generated in the year-ago period. Capital spending totaled $193 million compared with $199 million a year ago. Free cash flow was $540 million in the period.
Howmet paid out dividends of $44 million in 2022 compared with $19 million in the year-ago period. Also, it repurchased shares worth $400 million in the year compared with the $430 million buyback made a year ago.
Q1 Outlook
For the first quarter of 2023, Howmet expects revenues of $1.475-$1.525 billion. The mid-point of the guided range — $1.500 billion — lies above the Zacks Consensus Estimate of $1.48 billion. Adjusted EBITDA is expected to be between $325 and $345 million, while the margin is anticipated to be 22-22.6%. Adjusted earnings per share are estimated to be 35-39 cents in the first quarter. The mid-point of the guided range — 37 cents — lies above the Zacks Consensus Estimate of 36 cents.
2023 Outlook
For 2023, Howmet predicts revenues of $6.000-$6.200 billion. The mid-point of the guided range — $6.10 billion — lies below the Zacks Consensus Estimate of $6.14 billion. Adjusted EBITDA is estimated to be $1.335-$1.415 billion, while the margin is projected to be 22.3-22.8%. Adjusted earnings per share are forecasted in the band of $1.53-$1.67. The mid-point of the guided range — $1.60 — lies below the Zacks Consensus Estimate of $1.72. Free cash flow is expected to be $580-$650 million for 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Howmet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Howmet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Howmet (HWM) Down 9.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Howmet (HWM - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Howmet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Howmet Q4 Earnings Meet, Surge Y/Y on Higher Revenues
Howmet fourth-quarter 2022 adjusted earnings (excluding 12 cents from non-recurring items) of 38 cents per share matched the Zacks Consensus Estimate. The bottom line improved 26.7% year over year.
Total revenues of $1,513 million surpassed the Zacks Consensus Estimate of $1,471.7 million. The top line increased 17.7% from the year-ago quarter. The increase was backed by an improved commercial aerospace market and pricing actions.
Segmental Details
Engine Products’ revenues totaled $732 million, representing 48.4% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 21%, driven by strength in commercial aerospace, defense aerospace and oil and gas markets and pricing actions.
The Fastening Systems segment generated revenues of $285 million, accounting for 18.8% of net revenues in the reported quarter. Revenues increased 11% year over year, driven by strength in commercial aerospace and narrow body recovery as well as pricing actions.
The Engineered Structures segment’s revenues, representing 15.2% of net revenues, increased 21% year over year to $230 million. The results benefited from narrow body commercial aerospace market and pricing actions partly offset by Boeing 787 production declines.
Forged Wheels revenues totaled $266 million, representing 17.6% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 14%, driven by pricing actions and an increase in volumes, partially offset by forex woes.
Margin Profile
In the reported quarter, Howmet’s cost of goods sold increased 18.3% year over year to $1,110 million. Selling, general, administrative and other expenses increased 3.3% year over year to $63 million. Research and development expenses were $9 million in the quarter.
EBITDA, excluding special items, in the reported quarter was $336 million, up 14% year over year. Adjusted EBITDA margin decreased approximately 80 basis points (bps) year over year to 22.2%. Operating income increased 49.7% year over year to $220 million. Operating income margin increased approximately 310 bps year over year to 14.5% in the reported quarter. Net interest expenses in the quarter totaled $57 million, down 1.7% from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2022, Howmet had cash and cash equivalents of $791 million compared with $720 million at the end of the year-ago period. Long-term debt (less amount due within one year) was $4,162 million compared with $4,227 million in the year-ago period.
In 2022, Howmet generated net cash of $733 million from operating activities compared with $449 million generated in the year-ago period. Capital spending totaled $193 million compared with $199 million a year ago. Free cash flow was $540 million in the period.
Howmet paid out dividends of $44 million in 2022 compared with $19 million in the year-ago period. Also, it repurchased shares worth $400 million in the year compared with the $430 million buyback made a year ago.
Q1 Outlook
For the first quarter of 2023, Howmet expects revenues of $1.475-$1.525 billion. The mid-point of the guided range — $1.500 billion — lies above the Zacks Consensus Estimate of $1.48 billion. Adjusted EBITDA is expected to be between $325 and $345 million, while the margin is anticipated to be 22-22.6%. Adjusted earnings per share are estimated to be 35-39 cents in the first quarter. The mid-point of the guided range — 37 cents — lies above the Zacks Consensus Estimate of 36 cents.
2023 Outlook
For 2023, Howmet predicts revenues of $6.000-$6.200 billion. The mid-point of the guided range — $6.10 billion — lies below the Zacks Consensus Estimate of $6.14 billion. Adjusted EBITDA is estimated to be $1.335-$1.415 billion, while the margin is projected to be 22.3-22.8%. Adjusted earnings per share are forecasted in the band of $1.53-$1.67. The mid-point of the guided range — $1.60 — lies below the Zacks Consensus Estimate of $1.72. Free cash flow is expected to be $580-$650 million for 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Howmet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Howmet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.