Howmet Aerospace (NYSE: HWM) easily topped quarterly expectations, raised full-year guidance, and telegraphed a big boost to its dividend later this year. Investors are buying in, sending shares up 16% as of 11:15 a.m. ET.
Strong results despite Boeing's issues
Howmet is a collection of jet engine and aerospace component businesses that were cobbled together by Alcoa before being spun out as an independent. The company earned $0.57 per share in the first quarter, it reported today, on revenue of $1.824 billion, topping Wall Street's consensus estimate for $0.52 per share in earnings on sales of $1.7 billion.
Commercial aerospace sales were up 23% year over year, and companywide EBITDA margin at 24% was 100 basis points better than what Howmet had guided for. Free cash flow in the quarter was $95 million, the first time in the company's four-year history as a stand-alone that it has generated positive cash flow in the first quarter.
Howmet is a supplier to Boeing and warned that the aerospace giant's ongoing manufacturing issues mean Howmet is assuming "sharply lower" parts for new 737 MAX planes in 2024. But the company said it expects to offset the weakness at Boeing thanks to strong demand in other areas, leading it to boost full-year 2024 revenue guidance by $200 million.
Is Howmet Aerospace stock a buy?
Boeing's woes are actually helping fuel demand, forcing airlines to operate their existing fleet for longer and creating a need for more spare parts. CEO John Plant said that the company is feeling confident enough about its outlook and its ability to generate cash that he expects the board to approve a 40% increase in the dividend in the second half of 2024.
The assets that became Howmet went through some turbulent times first as part of Alcoa and then as part of Arconic, however, the shares are up 485% since the aerospace business was separated as a stand-alone in April 2020.
The stock is no longer the hidden gem it once was, but with commercial aerospace demand expected to remain strong for the foreseeable future, Howmet shares can still go higher from here.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
