On Thursday, Howmet Aerospace Inc. (NYSE:HWM (BMV:HWM)) experienced a shift in stock rating as KeyBanc adjusted its stance on the company, downgrading from Overweight to Sector Weight. The adjustment comes as the analyst at KeyBanc revised their expectations due to a leveling off in the demand within the commercial aerospace sector.
The analyst maintained their third-quarter 2024 earnings per share (EPS) estimate for Howmet Aerospace at $0.67. However, they slightly reduced the full-year 2024 EPS forecast to $2.59, a minor decrease from the previous estimate of $2.60. The forecast for 2025 saw a more significant adjustment, with EPS expectations lowered to $3.00 from the prior estimate of $3.30.
The revised estimates reflect the recent changes in the macroeconomic environment, which have begun to influence the company's outlook. Despite these adjustments, the analyst noted that the Forged Wheels division, serving the global Class 8 truck market, continues to perform well. This strength is attributed to the ongoing shift from steel to aluminum, which is becoming more pronounced as the global construction cycle slows and sales remain robust.
However, it was mentioned that the momentum for Howmet Aerospace in the second half of 2024 is being affected by short lead times. This factor is playing a role in the tempered expectations for the company's performance in the near term.
Howmet Aerospace, known for its engineering solutions in the aerospace and transportation industries, is navigating through a changing landscape as market dynamics evolve. The company's stock rating adjustment by KeyBanc signals a recalibration of expectations in line with current industry and economic conditions.
In other recent news, Howmet Aerospace has been the focus of several significant developments. The company's third-quarter 2024 guidance anticipates revenues to hit the midpoint of $1.855 billion, EBITDA at the midpoint of $465 million, and adjusted earnings per share (EPS) of $0.64, as reported by Truist Securities. Additionally, Susquehanna initiated coverage on Howmet Aerospace with a positive rating, highlighting the company's robust position within the Commercial Aerospace & Defense sectors. Deutsche Bank (ETR:DBKGn) also raised its price target for Howmet Aerospace shares, maintaining a Buy rating on the stock.
Recently, Howmet Aerospace closed a $500 million offering of 4.850% Notes due 2031, aiming to refinance existing debt and reduce annual interest expenses. The company also reported a 14% year-over-year increase in revenue and a 27% rise in commercial aerospace revenue. Furthermore, Howmet Aerospace plans to increase capital expenditures by $30 million in 2024 and raise its common stock dividend to $0.08 per share.
Analysts from Truist Securities and Deutsche Bank project solid results for the upcoming quarter, with Truist Securities expecting the aerospace aftermarket to balance out any weakness in the aerospace original equipment manufacturer (OEM) sector. Deutsche Bank predicts a third-quarter earnings per share (EPS) of $0.68 for Howmet, which is above the consensus estimate of $0.66. These recent developments highlight the strong performance and strategic direction of Howmet Aerospace.
InvestingPro Insights
While KeyBanc has adjusted its stance on Howmet Aerospace (NYSE:HWM), recent data from InvestingPro paints a nuanced picture of the company's financial health and market performance. Despite the downgrade, HWM has shown remarkable strength in the market, with a year-to-date price total return of 90.45% as of the latest data. This impressive performance is complemented by a strong 137.19% return over the past year, indicating robust investor confidence.
InvestingPro Tips highlight that Howmet Aerospace has raised its dividend for 4 consecutive years, suggesting a commitment to shareholder returns even as it navigates changing market conditions. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.57 for the last twelve months as of Q2 2024. This could indicate potential undervaluation, especially considering the recent stock performance.
The company's financial metrics also show promise, with revenue growth of 14.46% in the last twelve months as of Q2 2024, and an EBITDA growth of 23.98% over the same period. These figures align with the analyst's observation of continued strength in certain divisions, such as Forged Wheels.
For investors seeking a deeper understanding of Howmet Aerospace's potential, InvestingPro offers 15 additional tips, providing a comprehensive view of the company's financial health and market position.
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