The aviation industry has exhibited robust growth in recent years after suffering from major losses during the Covid-19 pandemic. As more and more countries have opened up their airspace for travel, the industry has rebounded back to its regular state while maintaining a steady growth of profit.

The aviation sector in the United States is one of the country’s biggest contributors to its GDP, driving nearly 5% of the U.S. GDP. The industry also employs more than 1 million employees around the globe and carries around 2.7 million passengers every day around the world.

Although the effect of the pandemic was highly detrimental to the industry and thwarted economic growth, it has grown back to its roots and has succeeded in maintaining a steady stream of profits since. The U.S. airlines reported a net profit of $2.10 billion for the third quarter of 2024, an increase of $400 million from the previous year’s value.

Looking forward, the U.S. aviation industry market size is forecasted to reach $105 billion by 2030, growing at a CAGR of 4.5%. The prospects of the industry and its ability to stand in the face of disasters and still drive profits are highlighted by this growth.

Amid this backdrop, Howmet Aerospace Inc. (HWM) stands as a forerunner in driving the industry’s growth forward. The company supplies advanced engineered solutions like airfoils, seamless rolled rings, titanium ingots, forged aluminum wheels, etc., which are crucial components of the aviation industry.

The company’s efforts resonate not only in its offerings but also in its stock performance. HWM’s stock climbed 42.5% over the past six months and delivered an impressive gain of 109.2% over the past year, closing the last trading session at $112.04.

Now, let us delve deeper into the factors that could shape HWM’s performance in the near future.

Sound Historical Growth

Over the past three years, HWM has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 13.9%, while EBITDA rose at a 15.4% CAGR. Moreover, operational income (EBIT) expanded at a CAGR of 19.3%. In addition, net income surged at a CAGR of 55.4%, and EPS climbed even higher at 57.9%.

Strong Financials

For the fiscal 2024 third quarter that ended September 30, HWM’s sales increased 10.7% year-over-year to $1.84 billion. Its operating income rose 37.1% from the year-ago value to $421 million. The company’s adjusted EBITDA grew 28.8% from the prior year’s quarter to $488 million.

Additionally, net income and EPS excluding special items increased 51% and 54.3% year-over-year to $290 million and $0.71, respectively. As of September 30, 2024, HWM’s total assets amounted to $10.56 billion, compared to $10.43 billion on December 31, 2023.

Favorable Analyst Estimates

Analysts predict HWM’s revenue and EPS for the fiscal fourth quarter ending December 2024 to increase 8.6% and 35.6% year-over-year to $1.88 billion and $0.72, respectively. Also, the company exceeded the consensus EPS estimates in each of the four trailing quarters, which is noteworthy.

For the full fiscal year ending December 2024, HWM’s revenue and EPS are expected to rise 11.7% and 45% from the previous year, reaching $7.42 billion and $2.67, respectively.

Furthermore, looking ahead to fiscal 2025, analysts anticipate further growth, with revenue and EPS forecasted to rise by 8.3% and 19.5% from the prior year, reaching $8.03 billion and $3.19, respectively.

High Profitability

HWM’s trailing-12-month EBITDA margin stands at 24.37%, 75.1% higher than the industry average of 13.92%. In addition, the company boasts a trailing-12-month net income margin of 14.81%, which is 126.2% higher than the sector average of 6.55%.

Also, the stock’s trailing-12-month levered FCF margin of 9.71% outperforms the industry average of 6.75% by 44%. Moreover, HWM’s trailing-12-month cash from operations of $1.28 billion is 278% higher than the industry average of $337.59 million.

POWR Ratings Reflects Optimism

HWM’s stable fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

HWM has a B grade for Quality, supported by profitability measures that exceed industry benchmarks. Its B grade for Momentum further underscores strong technical performance, with the stock trading above its 50-day moving average of $110.84 and 200-day moving average of $89.93.

Additionally, the stock has a B grade for Sentiment, in line with the optimistic analyst estimates. Within the A-rated Industrial – Machinery industry, HWM is ranked #22 out of 79 stocks.

Beyond what is stated above, we have also given HWM grades for Stability, Growth, and Value. Get all HWM ratings here.

Bottom Line

HWM has established itself as a major player in the aviation landscape through its essential parts offerings that are crucial for aircraft. As the aviation industry grows further, the company’s prospects can only keep getting better from here.

Considering HWM’s high profitability, strong financials, optimistic analyst estimates, and stable momentum, now might be the ideal time to consider adding HWM to one’s investment portfolio.

How Does Howmet Aerospace Inc. (HWM) Stack Up Against Its Peers?

Although HWM’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Industrial – Machinery industry:

Smiths Group plc (SMGZY)

Amada Co., Ltd. (AMDLY)

Taylor Devices, Inc. (TAYD)

To explore more A or B-rated Industrial – Machinery stocks, click here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

HWM shares were unchanged in premarket trading Thursday. Year-to-date, HWM has gained 107.65%, versus a 28.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

More Resources for the Stocks in this Article