Howmet's Transportation Market Under Pressure: Is the Risk Priced In?

Howmet Aerospace Inc. HWM has been witnessing persistent weakness in the commercial transportation market. In the first quarter of 2025, revenues from the commercial transportation market declined 14% on a year-over-year basis. Lower commercial truck builds, given tariff-related and economic uncertainty in North America, have been impacting the company’s near-term performance. HWM expects demand in the commercial transportation markets served by the Forged Wheels segment to remain soft till the second half of the year.

The company is dependent on a global supply chain, and in recent years, it has experienced supply-chain disruptions, particularly in the transportation and aerospace sectors, that resulted in delays and increased costs. Persistent supply-chain issues are likely to continue affecting the delivery of its finished products to its customers within the stipulated time, which might impact its top-line performance.

Nevertheless, solid momentum in Howmet’s commercial aerospace market, driven by robust OEM build rates and wide-body aircraft recovery, is expected to bolster its top line. Also, strength in the defense aerospace business, driven by rising U.S. & international defense budgets, bodes well for the company.

Segmental Performance of HWM’s Peers in Q1

Improving commercial air passenger traffic has been benefiting Textron Inc.’s TXT Aviation business unit. Strong fleet utilization, backed by improving commercial air travel, contributed to Textron Aviation unit’s aftermarket revenue growth of 6% on a year-over-year basis in the first quarter of 2025. Thanks to growing air travel, Textron has also been witnessing strong order activity, which resulted in a backlog of $7.87 billion for the Aviation segment.

Its another peer, RTX Corporation RTX, has been experiencing improving commercial OEM and commercial aftermarket sales in recent times. Notably, its first-quarter 2025 results reflected solid organic year-over-year sales growth of 8%. In particular, improvement in commercial aerospace bolstered quarterly results for both its Collins Aerospace and Pratt & Whitney business segments.

The Zacks Rundown for HWM

Shares of Howmet have surged 27.3% in the past three months compared with the industry’s growth of 8.7%.

From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 46.07X, above the industry average of 26.14X. The metric is pegged higher than its five-year median of 25.61X. HWM carries a Value Score of F.

The Zacks Consensus Estimate for HWM’s earnings for second-quarter 2025 and 2025 has increased 7.5% and 6.8%, respectively, in the past 60 days.

HWM stock currently sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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