Howmet Aerospace NYSE: HWM reported second-quarter results that exceeded the high end of its guidance, driven by continued growth in commercial aerospace, gas turbines and defense markets. The company also raised its full-year outlook for revenue, EBITDA, earnings per share and free cash flow.
Revenue rose 24% year over year in the second quarter, including the effects of acquisitions, while organic revenue increased 21%. Adjusted EBITDA increased 39% and EBITDA margin expanded 340 basis points to 32.1%. Adjusted earnings per share rose 46% to $1.33, while free cash flow totaled $479 million during the quarter and approximately $840 million during the first half.
“Second quarter revenue, EBITDA margin, and earnings per share all exceeded the high end of guidance,” Chief Financial Officer Patrick Winterlich said. The company generated 46% incremental flow-through from revenue to EBITDA, despite what management described as a modest headwind from the CAM Fastener acquisition.
End-Market Growth Led by Aerospace and Gas Turbines
Commercial aerospace revenue increased 28%, or 26% organically, as demand grew for both original-equipment production and spare parts. Howmet said it continued to experience higher demand for spares on legacy and next-generation aircraft engines.
Defense aerospace revenue increased 11%, or 7% organically, supported by spare-parts activity and higher legacy fighter demand. Gas turbine revenue climbed 38%, with management attributing the increase to rising electricity-generation demand, particularly for natural-gas-powered data centers.
Total spare-parts revenue across commercial aerospace, defense aerospace and gas turbines rose 37% to approximately $560 million. Spares represented about 22% of total revenue through the first half of 2026, a greater share than historically.
Commercial transportation revenue rose 12%, largely reflecting higher aluminum-cost pass-through. Wheel volumes declined 8% from a year earlier but increased 7% sequentially as the North American market began to recover.
Executive Chairman and CEO John Plant said Howmet had not experienced any changes in customer demand amid Middle East conflict-related volatility in fuel prices and air traffic. He said aircraft orders and backlogs continued to grow, supporting expectations for higher build rates through 2026, 2027 and beyond.
Segment Results and CAM Integration
Engine Products revenue increased 32% to $1.37 billion. Commercial aerospace revenue in the segment rose 37%, defense aerospace increased 17%, and gas turbine revenue grew 38%. EBITDA increased 51% to $517 million, while EBITDA margin rose 470 basis points to 37.7%. The segment added approximately 485 net new employees during the quarter as it increased capacity for future growth.
Fastening Systems revenue rose 37% to $589 million, including contributions from the CAM and Brunner acquisitions. Commercial aerospace revenue increased 39%, defense aerospace grew 45%, and commercial transportation revenue was flat. EBITDA rose 40% to $177 million, and margin increased 90 basis points to 30.1%.
Howmet completed its acquisition of CAM Fastener on April 6 for approximately $1.8 billion. Winterlich said the integration was on track. Plant said the company spent the initial months addressing IT systems, cybersecurity capabilities, employee benefits and asset-base needs. Management expects some operating synergies to begin appearing during the second half, with the majority expected in 2027.
Plant said CAM had been a roughly 20% margin business before being acquired, compared with about 30% for Howmet’s legacy fastening operations. He said the acquisition was expected to be approximately breakeven for earnings per share in 2026 due to debt servicing, before becoming accretive in 2027 and beyond.
Engineered Structures revenue declined 13% to $269 million following the March 31 divestiture of the Savannah Disc forging facility. Excluding the divestiture, revenue was approximately flat. The segment’s EBITDA margin increased 170 basis points to 23.8%.
Forged Wheels revenue increased 14%, as higher aluminum pass-through more than offset lower volumes. EBITDA rose 16% to $88 million. Management said higher metal pass-through reduced the segment’s margin percentage but did not have a material effect on EBITDA dollars.
Capacity Investments Target Future Demand
Plant said Howmet holds more than 50% global market share in industrial gas turbine blades and is expanding capacity in Japan, Europe and Virginia. The company has completed negotiations with its seven major gas turbine customers, though some have already sought to revisit and increase their demand outlooks.
Management expects capital expenditures to exceed $500 million in 2026 and to rise further in 2027, supporting both industrial gas turbines and commercial aerospace. Plant said new commitments made in August 2026 would generally not produce capacity until approximately August 2028 because of equipment lead times.
The company is also increasing aerospace capacity, including a newly approved plant investment. Plant said demand is beginning to build for higher wide-body production rates, including Boeing 787 production and Airbus A350 output.
On engine technology transitions, Plant said the LEAP-1B cutover to a new-technology blade had not yet occurred, although production should increase during the second half. He said the transition would likely occur in the first quarter or first half of 2027, though the date was not fixed. Howmet is also increasing output for the GTF Advantage program, with larger production gains expected through 2027.
Capital Returns and Raised Outlook
Howmet repurchased $300 million of stock during the second quarter at an average price of $251 per share, followed by another $200 million in July at an average price of $277. Year-to-date repurchases reached $800 million at an average price of $248 per share. About $700 million remained under the board’s authorization.
The company also retired $186 million of debt during the quarter and entered into a cross-currency swap that management said would save about $12 million in annualized interest expense. Net debt to trailing EBITDA ended the quarter at 1.4 times following the CAM acquisition. Plant said the company expects leverage to return to approximately one times by year-end.
Howmet raised its quarterly dividend 17% to $0.14 per share, payable in August.
- Third-quarter revenue guidance: $2.75 billion, plus or minus $10 million
- Third-quarter EBITDA guidance: $830 million, plus or minus $5 million
- Third-quarter EPS guidance: $1.35, plus or minus $0.01
- Full-year revenue guidance: $10.05 billion, plus or minus $50 million
- Full-year EBITDA guidance: $3.23 billion, plus or minus $20 million
- Full-year EPS guidance: $5.27, plus or minus $0.04
- Full-year free-cash-flow guidance: $1.9 billion, plus or minus $50 million
Plant said the company expects to provide its first view of 2027 revenue during its third-quarter earnings call in November, adding that 2027 revenue is expected to increase from 2026 levels.
About Howmet Aerospace (NYSE:HWM)
Howmet Aerospace Inc is an industrial technology company that designs, manufactures and repairs engineered metal products for the aerospace, transportation and industrial markets. Its product portfolio includes precision castings and forgings, engineered fasteners, seamless rolled rings, and complex components for turbine engines, airframes and industrial gas turbines. The company also provides aftermarket services such as component repair, overhaul and parts distribution to support the operating fleet of commercial and military customers.
Howmet serves a global customer base of original equipment manufacturers (OEMs) and aftermarket operators, with manufacturing, service and distribution facilities across North America, Europe and Asia.
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