HWM Howmet Aerospace
A superb aerospace supplier whose durable economics cannot justify the extraordinary growth embedded in its price.
The business
Howmet manufactures highly engineered castings, forgings, fasteners, and structural components for aircraft engines, airframes, gas turbines, and commercial vehicles. It earns attractive margins from mission-critical parts that require specialized metallurgy, extensive qualification, and reliable production. Long-lived aerospace programs and replacement-part demand provide recurring revenue, but the manufacturing technology requires specialist knowledge.
Quality gate · 78/100
Moat & management
| Moat | wide moat |
| Source | switching costs |
| Trajectory | stable |
| Management | adequate |
Qualification requirements, safety consequences, scarce metallurgical expertise, and long aircraft-program lives make replacing an established supplier costly and risky. Customer-backed capacity investments and a growing spares base reinforce the moat, though powerful OEM customers limit its expansion.
Management has improved margins, reduced leverage, and concentrated investment in higher-return businesses. However, aggressive repurchases at increasingly demanding valuations and sizable acquisitions temper enthusiasm for its capital allocation.
Owner-earnings inputs
| Owner earnings (TTM) | 1.66B |
| Owner-earnings yield | 1.5% |
| Free-cash-flow yield | 1.5% |
| Growth used (normalized) | 9.0% |
| Market-implied growth (reverse DCF) | 25.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.9% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 1.81B | 9.0% | 1.64B |
| 2 | 1.96B | 8.3% | 1.62B |
| 3 | 2.11B | 7.7% | 1.59B |
| 4 | 2.25B | 7.0% | 1.54B |
| 5 | 2.40B | 6.3% | 1.49B |
| 6 | 2.53B | 5.7% | 1.44B |
| 7 | 2.66B | 5.0% | 1.37B |
| 8 | 2.77B | 4.3% | 1.30B |
| 9 | 2.87B | 3.7% | 1.23B |
| 10 | 2.96B | 3.0% | 1.15B |
Key risks
- The valuation requires roughly 25% annual owner-earnings growth, far beyond a prudent decade-long assumption
- Aircraft production disruptions, customer concentration, or aerospace-cycle weakness could delay backlog conversion
- Costly capacity expansion, acquisitions, or operational failures could permanently reduce returns on capital
Catalysts
- Commercial aerospace backlog conversion and continued growth in high-margin engine spares
- Defense and gas-turbine demand supporting utilization, pricing, and operating leverage
Recent news
score · 8 articles
- Howmet (HWM) Stock Slides as Market Rises: Facts to Know Before You Trade
- LMT or HWM: Which Is the Better Value Stock Right Now?
- Brokers Suggest Investing in Howmet (HWM): Read This Before Placing a Bet
- Howmet Aerospace's Q2 2026 Earnings: What to Expect
- Jim Cramer on DPC: “I’d Love to See the Stock Come in Just a Bit Before Buying It”
- Airlines and Hyperscalers Clamor for Turbines. Only a Few Companies Make the Parts.
- Is Howmet’s Shift Into Russell Large‑Cap Growth and Defensive Indices Altering The Investment Case For Howmet Aerospace (HWM)?
- Howmet Aerospace (HWM) Could Be 11% Undervalued On Russell Index Changes
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~25%/yr owner-earnings growth over 10y (reverse DCF); model credits 9%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.