Howmet Aerospace(NYSE: HWM) stock is up a whopping 75% in 2024 and rose 14.7% in the last week to Friday morning trading. The latest leg up is due to its impressive second-quarter earnings release earlier this week.
Howmet's end markets
The company generates around 52% of its sales from commercial aerospace and 16% from defense aerospace, with commercial transportation at about 18%. The remaining 14% is under the "industrial and other" heading. Its crucial end markets are jet engine components, aerospace fastening systems, and airframe structural components.
Key customers include aerospace and defense giants GE Aerospace (12% of 2023 revenue) and RTX (9%). While it's no secret that end market demand for airplanes (commercial or defense) remains robust, and manufacturers like Boeing and Airbus have multiyear backlogs, there are questions about delivery rates.
Boeing's delivery issues are well documented, and Airbus recently lowered its guidance for airplane deliveries. Moreover, this year, GE Aerospace has significantly reduced its 2024 guidance for production of the LEAP engine, which powers the Airbus A320 neo and the Boeing 737 MAX.
Howmet's earnings dispel fears
That said, Howmet beat expectations for the second quarter, and management raised its full-year revenue, earnings, and cash-flow guidance. Instead of a baseline case of $2.35 in earnings per share (EPS), management now expects $2.55.
Image source: Boeing.
Discussing the airplane volume issue on the earnings call, CEO John Plant said that, despite slowing its production, Airbus was still increasing its requirements. Meanwhile, parts orders at Boeing "continue to be at levels above the actual 737 and 787 build rates."
Indeed, Boeing expects a recovery in build rates on the 737 MAX to hit 38 a month by year-end. That would be good news for Howmet, and it can continue its strong operational performance.
Should you invest $1,000 in Howmet Aerospace right now?
Before you buy stock in Howmet Aerospace, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Howmet Aerospace wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $717,050!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends RTX. The Motley Fool has a disclosure policy.
