Howmet Aerospace Trades Near 52-Week High: Is the Stock Still a Buy?

Howmet Aerospace Inc. HWM has been on a great run on the bourses lately, as the stock was hovering at more than $169 per share in the last four trading sessions. Shares of the advanced engineered solutions provider for the aerospace and transportation industries closed at $169.89 on Friday, close to its 52-week high of $171.52.Over the past year, the stock has surged 100.7%, outpacing the S&P 500 composite and the sub-industry’s growth of 12% and 13.8%, respectively. The company has also outperformed other industry players like GE Aerospace GE and RTX Corporation RTX, which have returned 52.3% and 27.1%, respectively, over the said time frame.HWM Outperforms Industry, S&P 500 & PeersImage Source: Zacks Investment ResearchThe stock is also trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.HWM Shares Trade Above 50-Day and 200-Day SMAImage Source: Zacks Investment ResearchFactors Driving Howmet AerospaceHowmet Aerospace is witnessing strong momentum in its commercial aerospace market. The strength in air travel continues, with wide-body aircraft demand also picking up, 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. Revenues from the commercial aerospace market increased 9% year over year in the first quarter of 2025, constituting 52% of its business.The sustained strength was attributed to new, more fuel-efficient aircraft with reduced carbon emissions and increased spare demand for engines. The Boeing Company BA is also anticipated to witness a gradual production recovery, particularly in the Boeing 737 MAX aircraft, with an end to its workers’ strike, which is likely to boost demand for Howmet Aerospace’s products in the market.While the commercial aerospace market has remained the major driver for the company, the defense side of the industry has also been witnessing positive momentum, cushioned by steady government support. Howmet Aerospace has been witnessing robust orders for engine spares for the F-35 program and spares and new builds for legacy fighters. In the first quarter, revenues from the defense aerospace market increased 19% year over year, constituting 17% of the company’s revenues.It's worth noting that in August 2024, the U.S. Senate Committee on Appropriations approved the fiscal year 2025 Defense Appropriations Act, which provides $852.2 billion in total funding. This reflects a 3.3% increase over the approved funding during fiscal 2024.  Such improved budgetary provisions set the stage for Howmet Aerospace, focused on defense business, to win more contracts, which is likely to boost its top line.Howmet Aerospace’s sound liquidity position is an added strength. Exiting the first quarter, the company’s cash equivalents and receivables were $536 million against short-term maturities of $7 million. HWM generated net cash of $253 million from operating activities in the first three months of 2025, higher than the $177 million generated in the year-ago period. It also generated a healthy free cash flow of $134 million in the same period.The company also remains committed to increasing shareholder value through dividend payouts and share repurchases. For instance, in the first three months of the year, it paid dividends worth $42 million and repurchased shares for $125 million. In January 2025, the company hiked its dividend by 25% to 10 cents per share (annually: 40 cents).Also, in July 2024, its board approved an increase in the share repurchase program by $2 billion to $2.487 billion of its common stock. As of April 30, 2025, Howmet Aerospace’s total share repurchase authorization available was $2 billion.Better-Than-Industry ReturnsHowmet Aerospace’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 27.25%, higher than the industry’s 10.75%. This reflects the company’s efficient usage of shareholder funds. In comparison, ROE for its peers, GE Aerospace and RTX Corp., is pegged at 29.15% and 12.71%, respectively.Earnings Estimate RevisionEarnings estimates for HWM have moved north over the past 30 days, reflecting analysts’ optimism. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)The Zacks Consensus Estimate for 2025 earnings is pegged at $3.46 per share, reflecting an increase of 6.5% in the past 30 days. The figure indicates year-over-year growth of 28.6%. The consensus mark for 2026 earnings is pinned at $4.10 per share, increasing 8.2% in the past 30 days. The figure also indicates year-over-year growth of 18.6%.Image Source: Zacks Investment ResearchStock ValuationDespite the positives, Howmet Aerospace’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 45.60X, higher than the industry average of 26.42X. Also, the stock is overvalued compared with GE Aerospace and RTX Corp., which are trading at 41.70X and 21.71X, respectively.Image Source: Zacks Investment ResearchShould You Bet on HWM Now?HWM’s solid foothold and persistent strength in the commercial and defense aerospace markets, driven by solid build rates, wide-body aircraft recovery and robust defense budget, bode well for growth. Given the strength in most of its served markets, Howmet Aerospace has built a sound liquidity position that supports its shareholder-friendly policies.Despite its expensive valuation, given the positive analyst sentiment and its growth prospects, the time appears right for potential investors to bet on this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>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 The Boeing Company (BA): Free Stock Analysis Report GE Aerospace (GE): Free Stock Analysis Report Howmet Aerospace Inc. (HWM): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks