Howmet Aerospace Inc. (NYSE: HWM)

Sector: Industrials Industry: Aerospace & Defense CIK: 0000004281
Market Cap 88.16 Bn
P/B 17.14
P/E 60.80
P/S 11.05
ROIC (Qtr) 18.72
Div Yield % 0.24
Rev 1y % (Qtr) 13.84
Total Debt (Qtr) 3.19 Bn
Debt/Equity (Qtr) 0.62

About

Howmet Aerospace Inc., often recognized by its stock symbols like NYSE:HWM, operates in the aerospace and transportation industries. This global company boasts advanced engineered solutions and has a presence in 20 countries, serving a multitude of markets with its diverse range of products and services. Howmet Aerospace Inc.'s primary businesses encompass jet engine components, aerospace fastening systems, and airframe structural components. These are crucial for mission-critical performance and efficiency in aerospace and defense applications....

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 1.71B provides robust 0.54x coverage of total debt 3.19B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 659M provide 659x coverage of short-term debt 1M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 1.71B provides exceptional 11.10x coverage of interest expenses 154M, showing strong debt service capability.
  • Operating cash flow of 1.71B provides strong 25.15x coverage of stock compensation 68M, indicating sustainable incentive practices.
  • Robust free cash flow of 1.28B exceeds capital expenditure of 431M by 2.97x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 1.71B barely covers its investment activities of (423M), with a coverage ratio of -4.04, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.71B provides thin coverage of dividend payments of (164M) with a -10.43 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (423M) provide weak support for R&D spending of 34M, which is -12.44x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Free cash flow of 1.28B represents just -6.39x of debt issuance (200M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 3.72B provide limited buffer against comprehensive income items of (1.75B), which is -2.12x, indicating elevated exposure to market risks.

Geographical Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Aerospace & Defense
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GE General Electric Co 342.94 Bn 42.54 7.80 20.84 Bn
2 RTX RTX Corp 252.05 Bn 38.24 2.93 40.71 Bn
3 BA Boeing Co 174.43 Bn -17.16 2.16 53.35 Bn
4 LMT Lockheed Martin Corp 126.61 Bn 30.15 1.73 22.19 Bn
5 GD General Dynamics Corp 95.62 Bn 22.69 1.86 8.01 Bn
6 NOC Northrop Grumman Corp /De/ 89.30 Bn 22.22 2.18 16.96 Bn
7 HWM Howmet Aerospace Inc. 88.16 Bn 60.80 11.05 3.19 Bn
8 TDG TransDigm Group INC 80.97 Bn 43.39 9.17 30.02 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 8.13 3.58
EV to Cash from Ops. EV/CFO 53.14 58.38
EV to Debt EV to Debt 28.50 98.04
EV to EBIT EV/EBIT 46.46 19.42
EV to EBITDA EV/EBITDA 39.77 33.60
EV to Free Cash Flow [EV/FCF] EV/FCF 71.05 91.66
EV to Market Cap EV to Market Cap 1.03 1.13
EV to Revenue EV/Rev 11.39 11.27
Price to Book Value [P/B] P/B 17.14 4.81
Price to Earnings [P/E] P/E 60.80 31.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 8.84 -3.75
Dividend Payout Ratio % Div Payout % (Qtr) 11.10 22.95
Dividend per Basic Share Div per Share (Qtr) 0.40 0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 12.60 14.15
Interest Coverage Int. cover (Qtr) 12.70 -18.00
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -57.30 -50.32
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 38.74 1,609.43
Dividend Growth (1y) % Div 1y % (Qtr) 73.91 0.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 26.65 -30.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 27.94 10.65
EBIT Growth (1y) % EBIT 1y % (Qtr) 34.43 -26.90
EBT Growth (1y) % EBT 1y % (Qtr) 42.90 -27.25
EPS Growth (1y) % EPS 1y % (Qtr) 37.02 -99.21
FCF Growth (1y) % FCF 1y % (Qtr) 27.64 6.61
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 20.63 -5.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.71 0.51
Cash Payout Ratio Cash Payout (Qtr) 0.08 0.07
Cash Ratio Cash Ratio (Qtr) 0.41 1.76
Current Ratio Curr Ratio (Qtr) 2.35 3.72
Debt to Equity Ratio Debt/Equity (Qtr) 0.62 0.07
Interest Cover Ratio Int Coverage (Qtr) 12.70 -18.00
Times Interest Earned Times Interest Earned (Qtr) 12.70 -18.00
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 28.10 -345.84
EBIT Margin % EBIT Margin % (Qtr) 24.53 -382.63
EBT Margin % EBT Margin % (Qtr) 22.60 -387.93
Gross Margin % Gross Margin % (Qtr) 33.40 -33.31
Net Profit Margin % Net Margin % (Qtr) 18.20 -389.13