Howmet Aerospace's Expenses are on the Rise: Will It Affect Margins?

Howmet Aerospace Inc. HWM has been grappling with rising costs and expenses over time. HWM reported an uptick in costs and expenses during the second quarter of 2025. The company’s cost of sales rose 6.1% year over year in the quarter due to increasing input costs and net headcount. While the metric remained flat in first-quarter 2025, it increased 7.3% year over year in 2024.

Despite the rising costs, HWM has consistently delivered margin expansion in recent quarters, reflecting its commitment to sustaining long-term profitability. The company’s adjusted EBITDA margin improved from 26.5% in the third quarter of 2024 to 26.8% in the fourth quarter and further jumped to 28.8% in the first quarter of 2025. In the second quarter of 2025, HWM sustained this momentum with a margin of 28.7%, marking a 300-basis point improvement year over year.

Also, the Engine Products, Fastening Systems and Engineered Structures segments posted adjusted EBITDA margin improvements of 200, 360 and 690 basis points in the second quarter, respectively, supported by manufacturing footprint optimization and a favorable product mix. Strong pricing strategies, disciplined cost control and enhanced operational efficiency have helped Howmet Aerospace sustain its margin performance.

Strong momentum in both the commercial and defense aerospace markets is further supporting its performance. Driven by strength across its businesses, HWM has raised its 2025 guidance for adjusted EBITDA margin. The company now expects adjusted EBITDA margin to be between 28.5% and 28.6% in 2025 compared with 27.8-28.2% projected earlier. This raise shows HWM’s confidence in delivering solid performance for the rest of the year.

Margin Performance of HWM’s Peers

Among its major peers, GE Aerospace’s GE cost of sales surged 22.8% year over year in the second quarter of 2025. However, GE Aerospace’s adjusted operating profit increased 23% year over year. However, GE Aerospace’s adjusted operating margin was down 10 basis points year over year.

RTX Corporation’s RTX total costs and expenses increased 6.4% year over year to $19.48 billion in the second quarter of 2025. RTX Corp. generated an adjusted operating profit of $2.79 billion. RTX Corp.’s Collins Aerospace segment’s adjusted operating profit totaled $1.25 billion compared with $1.15 billion in the year-ago quarter.

HWM's Price Performance, Valuation and Estimates

Shares of Howmet Aerospace have surged 92.6% in the past year compared with the industry’s growth of 13.6%.

From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 44.15X, above the industry’s average of 27.76X. Howmet Aerospace carries a Value Score of D.

The Zacks Consensus Estimate for HWM’s earnings has been on the rise over the past 60 days.

Howmet Aerospace currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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