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Why Is Howmet (HWM) Up 0.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Howmet (HWM - Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Howmet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Howmet Aerospace’s second-quarter 2024 adjusted earnings of 67 cents per share beat the Zacks Consensus Estimate of 60 cents. The bottom line surged 52% year over year.
Total revenues of $1.88 billion surpassed the consensus estimate of $1.84 billion. The top line increased 14% from the year-ago quarter. The increase was backed by strength in the company’s commercial aerospace market.
Segmental Details
The Engine Products segment’s revenues totaled $933 million, representing 49.6% of net revenues. On a year-over-year basis, the segment’s revenues increased 14%, driven by growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. The Zacks Consensus Estimate for Engine Products revenues was pegged at $915.3 million.
The Fastening Systems segment generated revenues of $394 million, accounting for 21% of net revenues. Revenues increased 20% year over year, driven by growth in the commercial aerospace market, including emerging wide-body aircraft recovery. The consensus estimate for Fastening Systems’ revenues was pegged at $381.5 million.
The Engineered Structures segment’s revenues, representing 14.6% of net revenues, increased 38% year over year to $275 million. The results benefited from growth in the commercial aerospace market, including wide-body aircraft recovery, and the defense aerospace market. The Zacks Consensus Estimate for Engineered Structures’ revenues was pegged at $257.4 million.
The Forged Wheels segment’s revenues totaled $278 million, representing 14.8% of net revenues. On a year-over-year basis, the segment’s revenues were down 7%. The consensus estimate for Forged Wheels’ revenues was pegged at $287.1 million.
Margin Profile
Howmet’s cost of goods sold increased 7.6% year over year to $1.29 billion. Selling, general, administrative and other expenses increased 10.2% year over year to $97 million. Research and development expenses were $7 million.
Adjusted EBITDA, excluding special items, was $483 million, up 31% year over year. Adjusted EBITDA margin increased 340 basis points year over year to 25.7%. Operating income increased 39.6% year over year to $398 million.
The operating income margin in the quarter was 21.2%, up 390 basis points year over year. Net interest expenses totaled $49 million, down 10.9% from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Howmet had cash and cash equivalents of $752 million compared with $610 million at the end of December 2023. Long-term debt (less amount due within one year) was $2.88 billion compared with $3.50 billion at the end of fourth-quarter 2023.
In the first six months of 2024, Howmet generated net cash of $574 million from operating activities compared with $252 million generated in the year-ago period. Capital spending totaled $137 million compared with $105 million spent a year ago. Free cash flow in the first six months of the year was $437 million.
Howmet paid out dividends of $42 million in the first six months of 2024 compared with $35 million in the year-ago period. Also, it repurchased shares worth $210 million in the period compared with the $125 million buyback made in the year-ago period.
Q3 Outlook
For the third quarter, Howmet expects revenues to be $1.845 -$1.865 billion. Adjusted EBITDA is expected to be between $460 million and $470 million while the adjusted EBITDA margin is anticipated in the range of 24.9-25.2%. Adjusted earnings per share are estimated to be in the range of 63-65 cents.
2024 Outlook
Howmet predicts revenues to be $7.400-$7.480 billion compared with the earlier anticipated range of $7.225-$7.375 billion. Adjusted EBITDA is expected to be between $1.855 billion and $1.875 billion while the adjusted EBITDA margin is projected to be 25.1%.
Adjusted earnings per share are forecasted to be in the band of $2.53-$2.57. Free cash flow is expected to be in the range of $840-$900 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 8.15% due to these changes.
VGM Scores
At this time, Howmet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Howmet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Howmet belongs to the Zacks Engineering - R and D Services industry. Another stock from the same industry, KBR Inc. (KBR - Free Report) , has gained 2.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
KBR reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +5.8%. EPS of $0.83 for the same period compares with $0.74 a year ago.
KBR is expected to post earnings of $0.83 per share for the current quarter, representing a year-over-year change of +10.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for KBR. Also, the stock has a VGM Score of B.
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Why Is Howmet (HWM) Up 0.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Howmet (HWM - Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Howmet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Howmet Q2 Earnings Beat Estimates, Revenues Increase Y/Y
Howmet Aerospace’s second-quarter 2024 adjusted earnings of 67 cents per share beat the Zacks Consensus Estimate of 60 cents. The bottom line surged 52% year over year.
Total revenues of $1.88 billion surpassed the consensus estimate of $1.84 billion. The top line increased 14% from the year-ago quarter. The increase was backed by strength in the company’s commercial aerospace market.
Segmental Details
The Engine Products segment’s revenues totaled $933 million, representing 49.6% of net revenues. On a year-over-year basis, the segment’s revenues increased 14%, driven by growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. The Zacks Consensus Estimate for Engine Products revenues was pegged at $915.3 million.
The Fastening Systems segment generated revenues of $394 million, accounting for 21% of net revenues. Revenues increased 20% year over year, driven by growth in the commercial aerospace market, including emerging wide-body aircraft recovery. The consensus estimate for Fastening Systems’ revenues was pegged at $381.5 million.
The Engineered Structures segment’s revenues, representing 14.6% of net revenues, increased 38% year over year to $275 million. The results benefited from growth in the commercial aerospace market, including wide-body aircraft recovery, and the defense aerospace market. The Zacks Consensus Estimate for Engineered Structures’ revenues was pegged at $257.4 million.
The Forged Wheels segment’s revenues totaled $278 million, representing 14.8% of net revenues. On a year-over-year basis, the segment’s revenues were down 7%. The consensus estimate for Forged Wheels’ revenues was pegged at $287.1 million.
Margin Profile
Howmet’s cost of goods sold increased 7.6% year over year to $1.29 billion. Selling, general, administrative and other expenses increased 10.2% year over year to $97 million. Research and development expenses were $7 million.
Adjusted EBITDA, excluding special items, was $483 million, up 31% year over year. Adjusted EBITDA margin increased 340 basis points year over year to 25.7%. Operating income increased 39.6% year over year to $398 million.
The operating income margin in the quarter was 21.2%, up 390 basis points year over year. Net interest expenses totaled $49 million, down 10.9% from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Howmet had cash and cash equivalents of $752 million compared with $610 million at the end of December 2023. Long-term debt (less amount due within one year) was $2.88 billion compared with $3.50 billion at the end of fourth-quarter 2023.
In the first six months of 2024, Howmet generated net cash of $574 million from operating activities compared with $252 million generated in the year-ago period. Capital spending totaled $137 million compared with $105 million spent a year ago. Free cash flow in the first six months of the year was $437 million.
Howmet paid out dividends of $42 million in the first six months of 2024 compared with $35 million in the year-ago period. Also, it repurchased shares worth $210 million in the period compared with the $125 million buyback made in the year-ago period.
Q3 Outlook
For the third quarter, Howmet expects revenues to be $1.845 -$1.865 billion. Adjusted EBITDA is expected to be between $460 million and $470 million while the adjusted EBITDA margin is anticipated in the range of 24.9-25.2%. Adjusted earnings per share are estimated to be in the range of 63-65 cents.
2024 Outlook
Howmet predicts revenues to be $7.400-$7.480 billion compared with the earlier anticipated range of $7.225-$7.375 billion. Adjusted EBITDA is expected to be between $1.855 billion and $1.875 billion while the adjusted EBITDA margin is projected to be 25.1%.
Adjusted earnings per share are forecasted to be in the band of $2.53-$2.57. Free cash flow is expected to be in the range of $840-$900 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 8.15% due to these changes.
VGM Scores
At this time, Howmet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Howmet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Howmet belongs to the Zacks Engineering - R and D Services industry. Another stock from the same industry, KBR Inc. (KBR - Free Report) , has gained 2.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
KBR reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +5.8%. EPS of $0.83 for the same period compares with $0.74 a year ago.
KBR is expected to post earnings of $0.83 per share for the current quarter, representing a year-over-year change of +10.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for KBR. Also, the stock has a VGM Score of B.