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01/11 03:17
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with increased margins and positive growth across key segments such as commercial aerospace and defense. Despite some uncertainties in guidance for 2026, the company shows optimism in future growth, particularly in aerospace and IGT. The Q&A section further supports this with management expressing confidence in spares demand and minimal impact from raw material issues. Overall, the positive outlook in strategic markets and robust financial health suggest a positive stock price movement.
Revenue Revenue increased by 14% year-over-year, driven by strong performance in Commercial Aerospace (up 15%), Defense Aerospace (up 24%), and Industrial markets (up 18%). Commercial Transportation revenue declined by 3% due to higher aluminum costs and tariffs.
EBITDA EBITDA increased by 26% year-over-year, exceeding $600 million. This growth outpaced revenue growth and was supported by strong performance across segments.
EBITDA Margin EBITDA margin increased by 290 basis points year-over-year to 29.4%, despite absorbing costs associated with 265 net headcount additions.
Earnings Per Share (EPS) EPS increased by 34% year-over-year to $0.95, reflecting strong operational performance and margin expansion.
Free Cash Flow Free cash flow was $423 million, which included $108 million in capital expenditures for the quarter and $330 million year-to-date. This reflects higher investments for growth in Commercial Aerospace and IGT.
Capital Expenditures Year-to-date capital expenditures reached $330 million, higher than the full year 2024, with 70% allocated to the engines business for growth investments.
Net Debt-to-EBITDA Net leverage improved to 1.1x net debt-to-EBITDA, reflecting debt reduction and strong cash generation.
Dividend Payments Dividend payments increased by 20% in the third quarter compared to the prior quarter, and were 50% higher than Q3 of the previous year.
Commercial Aerospace Revenue Commercial Aerospace revenue increased by 15% year-over-year, driven by a 38% increase in commercial aero part sales and a 31% increase in spares.
Defense Aerospace Revenue Defense Aerospace revenue grew by 24% year-over-year, driven by a 33% increase in engine spares and new F-35 aircraft builds.
Industrial and Other Markets Revenue Industrial and other markets revenue increased by 18% year-over-year, driven by oil and gas (up 33%) and IGT (up 23%).
Commercial Transportation Revenue Commercial Transportation revenue declined by 3% year-over-year, with a 16% decrease in wheels volume offset by higher aluminum costs and tariffs.
Engines Segment Revenue Engines segment revenue increased by 17% year-over-year to $1.1 billion, with strong growth in Commercial Aerospace (up 13%), Defense Aerospace (up 23%), oil and gas (up 33%), and IGT (up 23%).
Engines Segment EBITDA Engines segment EBITDA increased by 20% year-over-year to $368 million, with an EBITDA margin of 33.3%, up 80 basis points year-over-year.
Fastening Systems Revenue Fastening Systems revenue increased by 14% year-over-year to $448 million, driven by Commercial Aerospace (up 27%) and offset by a 17% decline in Commercial Transportation.
Fastening Systems EBITDA Fastening Systems EBITDA increased by 35% year-over-year to $138 million, with an EBITDA margin of 30.8%, up 480 basis points year-over-year.
Engineered Structures Revenue Engineered Structures revenue increased by 14% year-over-year to $289 million, driven by Commercial Aerospace (up 7%) and Defense Aerospace (up 42%).
Engineered Structures EBITDA Engineered Structures EBITDA increased by 53% year-over-year to $58 million, with an EBITDA margin of 20.1%, up 510 basis points year-over-year.
Forged Wheels Revenue Forged Wheels revenue was flat year-over-year, with a 16% decrease in volume offset by higher aluminum costs, tariff pass-through, and favorable foreign currency.
Forged Wheels EBITDA Forged Wheels EBITDA increased by 14% year-over-year to $73 million, with an EBITDA margin of 29.6%, up 350 basis points year-over-year.
New Michigan Aero Engine core and casting plant: The plant is on track with machines now building some parts. More equipment will be installed over the next 6 months.
Tooling plant: The new plant is now equipped and staffing is well underway.
Commercial Aerospace: Revenue increased by 15%, driven by demand for engine spares and a record backlog for fuel-efficient aircraft.
Defense Aerospace: Revenue grew by 24%, driven by engine spares (up 33%) and new F-35 aircraft builds.
Industrial and Other Markets: Revenue increased by 18%, with oil and gas up 33% and IGT up 23%.
Revenue Growth: Total revenue increased by 14% year-over-year, with EBITDA up 26% and operating income up 29%.
Free Cash Flow: Free cash flow was $423 million after $108 million in capital expenditures.
Debt Reduction: Paid off $63 million of U.S. term loan early, reducing net leverage to 1.1x net debt-to-EBITDA.
Share Buybacks: $200 million in Q3 and $100 million in October, totaling $600 million year-to-date.
Dividend Increase: Quarterly dividend increased by 20% in Q3.
Market Expansion in IGT and Oil & Gas: Growth in midsized turbines driven by data center build-outs and demand for fast-acting turbine response.
Future Revenue Outlook: 2026 revenue projected at $9 billion, up 10% year-over-year.
Commercial Transportation: Revenue in commercial transportation was down 3% in the third quarter, with wheels volume decreasing by 16%. This decline is attributed to higher aluminum costs, tariffs, and low freight rates, which have led smaller fleets to delay truck purchases. Additionally, the large price increases for Class 8 trucks due to tariffs continue to create uncertainty for Howmet.
Tariff Uncertainty: Tariff changes continue to produce uncertainty for Howmet, with a net tariff drag of around $5 million. This creates challenges in pricing and cost management, particularly in the commercial transportation segment.
Headcount Increase: The company has added approximately 1,125 incremental headcount year-to-date, which has created a near-term margin drag. While this positions the company for future growth, it adds short-term operational costs.
Supply Chain Expansion: The build-out of five new manufacturing plants or extensions, including the Michigan Aero Engine core and casting plant, involves significant capital expenditure and operational complexity. Delays or inefficiencies in this expansion could impact future growth plans.
Commercial Truck Market: The commercial truck market continues to struggle due to low freight rates and high truck prices, which are impacting demand. This poses a risk to Howmet's revenue in this segment.
Revenue Outlook for 2025: Revenue for the balance of 2025 has increased compared to the prior guide, benefiting from stronger Boeing 737 builds and engine spares. Full-year revenue is projected at $8.15 billion, plus or minus $10 million.
Revenue Outlook for 2026: Revenues are expected to reach $9 billion, plus or minus, representing an approximate 10% year-on-year increase. Detailed guidance will be provided in February 2026.
Q4 2025 Financial Projections: Revenue is projected at $2.1 billion, plus or minus $10 million. EBITDA is expected to be $610 million, plus or minus $5 million. Earnings per share are forecasted at $0.95, plus or minus $0.01.
Full-Year 2025 Financial Projections: EBITDA is projected at $2.375 billion, plus or minus $5 million. Earnings per share are expected to be $3.67, plus or minus $0.01. Free cash flow is forecasted at $1.3 billion, plus or minus $25 million.
Commercial Aerospace Outlook: Air travel continues to grow year-over-year, supported by a solid summer period. The backlog of commercial aircraft extends for many years, even with anticipated increases in build rates over the next five years. Demand for aircraft aftermarket parts, especially engine turbine blades, is growing.
Defense Aerospace Outlook: Sales remain strong with steady F-35 OE sales and growth in legacy fighter jets (F-15 and F-16). Defense spare sales are also increasing.
Industrial Gas Turbines (IGT) and Oil & Gas Outlook: Growth in IGT is extremely strong in both OE and aftermarket sectors. Midsized turbines (up to 45 megawatts) are expected to grow for many years, driven by data center build-outs and the need for reliable electricity supply.
Commercial Truck Market Outlook: Volumes continue to struggle due to low freight rates and high Class 8 truck prices, primarily driven by tariffs. Tariff-related uncertainty persists, with a net drag of approximately $5 million.
Capital Expenditure and Expansion Plans: The build-out of five new manufacturing plants or extensions continues. The Michigan Aero Engine core and casting plant is on track, with significant equipment installation planned over the next six months. Investments are aimed at supporting future growth.
Dividend Increase: Dividend payments were increased in August by a further 20% versus the prior quarter. The quarterly dividend is now $0.12 per share, which is 50% higher than Q3 of last year.
Share Buyback Program: $200 million of cash was deployed to buybacks in Q3 with an additional $100 million buyback in October. October year-to-date buyback is now $600 million, which is $100 million higher than the 2024 full year. Remaining authorization from the Board of Directors for share repurchases is approximately $1.6 billion as of the end of October.
The earnings call reveals strong financial performance with increased margins and positive growth across key segments such as commercial aerospace and defense. Despite some uncertainties in guidance for 2026, the company shows optimism in future growth, particularly in aerospace and IGT. The Q&A section further supports this with management expressing confidence in spares demand and minimal impact from raw material issues. Overall, the positive outlook in strategic markets and robust financial health suggest a positive stock price movement.
The earnings call presents a positive outlook with increased dividends, share buybacks, and capacity expansion. Strong guidance for 2025 in revenue, EBITDA, and EPS further supports a positive sentiment. The Q&A section reveals management's optimism about future profitability, solid market conditions, and strategic growth plans. Despite some concerns about emissions requirements and supply chain bottlenecks, the overall sentiment remains positive, especially with the anticipation of improved margins and significant orders related to the Precision Castparts facility accident.
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