Howmet (HWM) Q1 Earnings & Revenues Surpass Estimates, Up Y/Y

Howmet Aerospace Inc. HWM has reported better-than-expected first-quarter 2022 results. The company’s earnings surpassed the Zacks Consensus Estimate by 6.9% and sales beat the same by 1.9%.

Earnings, excluding special items, were 31 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 29 cents. Earnings increased 40.9% from the year-ago quarter’s 22 cents per share, driven by an increase in revenues. Quarterly earnings exceeded the company’s projection of 28-30 cents.

On a sequential basis, Howmet’s bottom line increased 3.3% from 30 cents.

Revenue Details

In the quarter under review, Howmet’s net sales were $1,324 million, reflecting a 9.5% increase from the year-ago quarter. The increase was backed by an improvement in the commercial aerospace and commercial transportation markets and its pricing actions. Weakness in the defense aerospace market was a spoilsport.

Howmet’s top line beat the Zacks Consensus Estimate of $1,300 million and the company’s projection of $1.28-$1.32 billion. On a sequential basis, HWM’s revenues increased 3%.

Howmet reports revenues under four segments. A brief discussion on the quarterly results is provided below.

Engine Products’ revenues totaled $631 million, representing 47.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 18%, driven by strength in the commercial aerospace and industrial gas turbine markets, partially offset by softness in the defense aerospace market.

The Fastening Systems segment generated revenues of $264 million, accounting for 19.9% of net revenues in the reported quarter. Revenues declined 3% year over year due to poor performance in the defense aerospace market, partially offset by gains in the commercial transportation market.

The Engineered Structures segment’s revenues, representing 13.7% of net revenues, increased 3% year over year to $182 million. The results benefited from gains in the commercial aerospace market, partially offset by weakness in the defense aerospace market.

Forged Wheels revenues totaled $247 million, representing 18.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 9%, driven by the company’s effective pricing actions, partially offset by a decline in volumes owing to supply chain issues.

Howmet Aerospace Inc. Price, Consensus and EPS Surprise

Howmet Aerospace Inc. Price, Consensus and EPS Surprise

Howmet Aerospace Inc. price-consensus-eps-surprise-chart | Howmet Aerospace Inc. Quote

Margin Profile

In the reported quarter, Howmet’s cost of goods sold increased 8.8% year over year to $950 million. It represented 71.8% of the reported quarter’s net sales compared with 72.2% in the year-ago quarter.

Selling, general, administrative, and other expenses increased 6.2% year over year to $69 million. It represented 5.2% of net sales in the reported quarter compared with 5.4% in the year-ago quarter. Research and development expenses were $7 million in the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $300 million, and adjusted EBITDA margin was 22.7%. Operating profits increased 21.7% year over year to $230 million, whereas margin grew 180 basis points to 17.4%.

Net interest expenses in the quarter totaled $58 million, down 19.4% from the year-ago quarter. The adjusted tax rate in the reported quarter was 24.6%.

Balance Sheet and Cash Flow

Exiting the first quarter of 2022, Howmet had cash and cash equivalents of $520 million, decreasing 27.8% from $720 million recorded in the last reported quarter. Long-term debt was $4,228 million, marginally up from $4,227 million at the end of the last reported quarter.

In the first quarter, Howmet generated net cash of $55 million from its operating activities against $6 million used in the year-ago period. Capital spending totaled $62 million compared with $55 million a year ago. Free cash outflow was $7 million in the quarter.

The company paid out dividends of $9 million in the first three months compared with $1 million in the year-ago period. Also, it repurchased shares worth $175 million in the first three months versus no repurchase made a year ago.

Outlook

For 2022, the company anticipates revenues of $5.56-$5.72 billion. The mid-point is currently pegged at $5.64 billion. Earnings (excluding special items) are expected to be $1.33-$1.45, with the mid-point at $1.39.

Adjusted EBITDA is expected to be $1.265-$1.335 billion for the year, with the mid-point of $1.3 billion. The EBITDA margin is projected at 22.8-23.3%, the midpoint being 23%. Free cash flow is predicted to be $575-$675 million, with a mid-point of $625 million.

For the second quarter, the company anticipates revenues of $1.35-$1.39 billion, with a mid-point of $1.37 billion. Earnings (excluding special items) are expected to be 31-33 cents (the mid-point being 32 cents), while adjusted EBITDA is predicted to be $302-$318 million (the mid-point being $310 million).

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked companies are discussed below.

PotlatchDeltic Corporation PCH presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 7.2%, on average.

PCH’s earnings estimates increased 31.1% for 2022 in the past 60 days. Its shares have gained 2.6% in the past three months.

NVR, Inc. NVR presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 5.9%, on average.

In the past 60 days, NVR’s earnings estimates have increased 20.4% for 2022. The stock has lost 16% in the past three months.

EMCOR Group, Inc. EME presently carries a Zacks Rank of 2.

Earnings estimates of EMCOR have increased 1.6% for 2022 in the past 60 days. EME’s shares have declined 9.1% in the past three months.

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