Howmet Aerospace Inc. (HWM Quick QuoteHWM - Free Report) has been benefiting from solid momentum in the commercial aerospace market, driven by robust build rates and wide-body aircraft recovery. The strength in air travel continues, with wide-body aircraft demand remaining high, supporting continued OEM spending. Pickup in air travel has been positive for the company as the increased usage of aircraft spurs spending on parts and products that it provides, which drives sales. Revenues from the commercial aerospace market increased 17% year over year in the third quarter of 2024, constituting more than 50% of its business.

While the commercial aerospace market has remained a major driver for the company, the defense side of the industry has also been witnessing positive momentum, cushioned by steady government support. The company has been witnessing robust orders for engine spares for the F-35 program and spares and new builds for legacy fighters. Solid U.S budgetary provisions for the defense sector set the stage for HWM, focused on its business to win more contracts, which is likely to boost its top line.

Howmet’s measures to reward shareholders are also encouraging. In the first nine months of 2024, it paid dividends worth $76 million and repurchased shares for $310 million. In July 2024, the company hiked its dividend by 60% to 8 cents per share (annually: 32 cents). In the same month, its board also approved an increase in the its share repurchase program by $2 billion to $2.487 billion of its common stock.

The company’s sound liquidity position is an added positive. At the end of the third quarter of 2024, Howmet’s cash equivalents and receivables were $1.23 billion against short-term maturities of $1 million.

HWM Stock’s Price Performance

Image Source: Zacks Investment Research

In the past three months, this Zacks Rank #3 (Hold) company has gained 19.7% against the industry’s 9.7% decline.

However, HWM has been witnessing weakness in the commercial transportation market. In third-quarter 2024, revenues from the commercial transportation market declined 12% on a year-over-year basis. The company expects demand in the commercial transportation markets served by the Forged Wheels segment to decline in the near term due to lower OEM builds. Production issues at Boeing due to quality control challenges and labor union work stoppage are expected to adversely impact narrow-body and wide-body production rates in the quarters ahead.

The company is also grappling with rising costs and expenses. In 2023, its cost of goods sold jumped 16.3% year over year while selling, general, administrative and other expenses also increased 15.6%. The trend continued in the first nine months of 2024, with the cost of goods sold increasing 8.1% and selling, general, administrative expenses rising 8%, primarily due to an increase in employment costs.

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