Howmet's Margins Expand Despite Rising Costs: Will the Momentum Sustain?

Howmet Aerospace Inc. HWM is grappling with rising costs and expenses over time. HWM reported an uptick in costs and expenses during the third quarter of 2025. The company’s cost of sales increased 8.9% year over year in the quarter due to rising input costs and net headcount. While the metric remained flat in first-quarter 2025, it increased 6.1% year over year in the second quarter.

Despite the rising costs, HWM has consistently delivered margin expansion in recent quarters, reflecting its commitment to sustaining long-term profitability. The company reported an adjusted EBITDA margin of 28.8% in the first quarter of 2025 and 28.7% in the second quarter. In the third quarter, the company reported an adjusted EBITDA margin of 29.4%, marking a 290-basis point improvement year over year.

Also, in the same quarter, the Engine Products, Fastening Systems and Engineered Structures segments posted adjusted EBITDA margin improvements of 80, 480 and 510 basis points, respectively. Strong pricing strategies, disciplined cost control and enhanced operational efficiency have helped Howmet sustain its margin performance.

Strong momentum in both the commercial and defense aerospace markets is further supporting Howmet’s 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 29% in 2025 compared with 28.5-28.6% projected 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 24.7% year over year in the third quarter of 2025. However, GE Aerospace’s adjusted operating profit increased 26.5% year over year. GE Aerospace’s adjusted operating margin was 20.3%, relatively stable year over year.

RTX Corp. ’s RTX total costs and expenses increased 10% year over year to $20 billion in the third quarter of 2025. RTX Corp. generated an adjusted operating profit of $2.97 billion in the third quarter. RTX Corp. reported adjusted operating profit of $2.48 billion in the prior-year quarter.

HWM's Price Performance, Valuation and Estimates

Shares of Howmet have surged 79% in the past year compared with the industry’s growth of 35.5%.

From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 50.36X, above the industry’s average of 33.02X. Howmet carries a Value Score of D.

The Zacks Consensus Estimate for HWM’s 2025 earnings has remained steady over the past 60 days.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research