Canada markets open in 3 hours 44 minutes
  • S&P/TSX

    20,485.66
    -39.74 (-0.19%)
     
  • S&P 500

    4,071.70
    -4.87 (-0.12%)
     
  • DOW

    34,429.88
    +34.88 (+0.10%)
     
  • CAD/USD

    0.7449
    +0.0024 (+0.32%)
     
  • CRUDE OIL

    81.50
    +1.52 (+1.90%)
     
  • BTC-CAD

    23,258.97
    +299.99 (+1.31%)
     
  • CMC Crypto 200

    410.60
    +9.18 (+2.29%)
     
  • GOLD FUTURES

    1,807.70
    -1.90 (-0.10%)
     
  • RUSSELL 2000

    1,892.84
    +11.16 (+0.59%)
     
  • 10-Yr Bond

    3.5060
    0.0000 (0.00%)
     
  • NASDAQ futures

    11,971.25
    -39.00 (-0.32%)
     
  • VOLATILITY

    20.20
    +0.36 (+1.81%)
     
  • FTSE

    7,574.38
    +18.15 (+0.24%)
     
  • NIKKEI 225

    27,820.40
    +42.50 (+0.15%)
     
  • CAD/EUR

    0.7070
    +0.0026 (+0.37%)
     

Howmet (HWM) Q2 Earnings & Revenues Beat Estimates, Rise Y/Y

Howmet Aerospace Inc. HWM reported better-than-expected second-quarter 2022 results. HWM’s earnings surpassed the Zacks Consensus Estimate by 6.1% and sales beat the same by 2%.

Earnings, excluding special items, were 35 cents per share in the reported quarter, surpassing the Zacks Consensus Estimate of 33 cents. Earnings increased 59.1% from the year-ago quarter’s 22 cents per share, driven by higher revenues. Quarterly earnings exceeded management’s projection of 31-33 cents.

On a sequential basis, Howmet’s bottom line increased 12.9% from 31 cents.

Revenue Details

In the quarter under review, Howmet’s net sales were $1,393 million, reflecting a 17% increase from the year-ago quarter’s number. The increase was backed by an improved commercial aerospace market and its pricing actions. Howmet’s top line beat the Zacks Consensus Estimate of $1,300 million and management’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 $652 million, representing 46.8% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 20%, driven by strength in the commercial aerospace, and oil and gas volume.

The Fastening Systems segment generated revenues of $277 million, accounting for 19.9% of net revenues in the reported quarter. Revenues increased 6% year over year, driven by strength in the commercial aerospace, partially offset by a poor performance in the industrial market and a decline in Boeing 787 production.

The Engineered Structures segment’s revenues, representing 13.3% of net revenues, increased 16% year over year to $185 million. The results benefited from gains in the commercial aerospace market, partially offset by a decline in Boeing 787 production.

Forged Wheels revenues totaled $279 million, representing 20% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 22%, driven by an expanded volume, partially offset by an unfavorable forex movement.

Howmet Aerospace Inc. Price and Consensus

Howmet Aerospace Inc. Price and Consensus
Howmet Aerospace Inc. Price and Consensus

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

Margin Profile

In the reported quarter, Howmet’s cost of goods sold increased 15.2% year over year to $987 million. It represented 70.9% of the reported quarter’s net sales compared with 71.7% in the year-ago quarter.

Selling, general, administrative and other expenses increased 50.9% year over year to $83 million. The metric represented 6% of net sales in the reported quarter compared with 4.6% in the year-ago quarter. Research and development expenses were $9 million in the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, in the reported quarter were $317 million, while adjusted EBITDA margin was 22.8%. Operating profits increased 16.4% year over year to $241 million, whereas margin of 17.3% was in line with the year-ago reported figure.

Net interest expenses in the quarter totaled $57 million, down 13.6% from the year-ago quarter’s figure. The adjusted tax rate in the reported quarter was 23.2%.

Balance Sheet and Cash Flow

At the time of exiting the second quarter of 2022, Howmet had cash and cash equivalents of $537 million, decreasing 25.1% from $720 million recorded in the fourth quarter of 2021. Long-term debt was $4,169 million, down 1.4% from $4,227 million reported in the fourth quarter of 2021.

In the first six months, Howmet generated net cash of $213 million from its operating activities compared with $79 million generated in the year-ago period. Capital spending totaled $106 million compared with $91 million a year ago. Free cash flow was $107 million in the quarter.

Howmet paid out dividends of $18 million in the first six months compared with $1 million in the year-ago period. Also, it repurchased shares worth $235 million in the first six months compared with a $200-million buyback made a year ago.

Outlook

For 2022, Howmet anticipates revenues of $5.64-$5.71 billion. The midpoint is currently pegged at $5.68 billion. Earnings (excluding special items) are expected to be $1.38-$1.42, with the midpoint at $1.41.

Adjusted EBITDA is expected to be $1.276-$1.299 billion for the year, with the mid-point of $1.29 billion. The EBITDA margin is projected at 22.6-22.7%, the midpoint being 22.7%. Free cash flow is predicted to be $625-$675 million, with a midpoint of $650 million.

For the third quarter, Howmet anticipates revenues of $1.425-$1.455 billion, with a mid-point of $1.44 billion. Earnings (excluding special items) are expected to be 35-37 cents (the midpoint being 36 cents), while adjusted EBITDA is predicted to be $320-$331 million (the midpoint being $326 million).

Zacks Rank & Stocks to Consider

Howmet currently carries a Zacks Rank #4 (Sell).

Some better-ranked companies are discussed below:

Quanex Building Products Corporation NX presently sports a Zacks Rank #1 (Strong Buy). NX delivered a trailing four-quarter earnings surprise of 30.2%, on average. You can see  the complete list of today’s Zacks #1 Rank stocks here.

NX’s earnings estimates have increased 21.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have rallied 11.7% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 47%, on average.

In the past 60 days, TWI’s earnings estimates have increased 43.3% for 2022. The stock has surged 46.4% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 29% in the past six months.


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
 
Valmont Industries, Inc. (VMI) : Free Stock Analysis Report
 
Quanex Building Products Corporation (NX) : Free Stock Analysis Report
 
Titan International, Inc. (TWI) : Free Stock Analysis Report
 
Howmet Aerospace Inc. (HWM) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research