Howmet Anticipates Margin Improvement: What's Driving the Growth?

Howmet Aerospace Inc. HWM continues to perform well, showing strong operational execution and margin resilience despite cost pressures. In the second quarter of 2025, the company’s cost of sales increased 6.1% year over year, driven by higher input costs and net headcount. While the metric remained flat in first-quarter 2025, it increased 7.3% year over year in 2024.

Despite these headwinds, Howmet has maintained consistent margin expansion. The company’s adjusted EBITDA margin rose from 26.5% in the third quarter of 2024 to 26.8% in the fourth quarter, and further climbed to 28.8% in the first quarter of 2025. In the second quarter, HWM sustained this momentum with a margin of 28.7%, marking a 300-basis point improvement from the prior year.

Also, the Engine Products, Fastening Systems and Engineered Structures segments reported margin gains of 200, 360 and 690 basis points, respectively, supported by manufacturing footprint optimization, a favorable product mix and effective pricing actions.

Strong demand from both commercial and defense aerospace markets continues to bolster the company’s overall performance. Driven by strength across its businesses, Howmet has raised its 2025 adjusted EBITDA margin outlook to 28.5-28.6% from 27.8-28.2% anticipated earlier. Strong pricing and productivity gains are the main factors driving Howmet’s margin improvement.

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 have surged 82.9% in the past year compared with the industry’s growth of 17.8%.

From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 46.12X, above the industry’s average of 28.86X. Howmet carries a Value Score of D.

The Zacks Consensus Estimate for HWM’s 2025 earnings has increased a penny over the past 60 days.

Howmet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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

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