Howmet Aerospace Q3 Earnings Call Highlights

Key Points

• Record Q3 performance: Howmet’s revenue rose 29% to $2.7 billion, while adjusted EBITDA increased 43% to $879 million and adjusted EPS climbed 54% to $1.46. Free cash flow reached a quarterly record of $562 million.
• Broad-based demand: Commercial aerospace, industrial gas turbines and commercial transportation all posted strong growth, with gas-turbine revenue up 45% and aerospace spares up 30%. Management expects industrial gas-turbine sales to double from 2025 levels within three years.
• Guidance and shareholder returns increased: Howmet raised its 2026 outlook to approximately $10.3 billion in revenue, $5.50 in adjusted EPS and $2 billion in free cash flow, while introducing 2027 revenue guidance of about $11.5 billion. The company also authorized an additional $5 billion for share repurchases and raised its dividend 17%.

Howmet Aerospace NYSE: HWM reported third-quarter 2026 revenue of $2.7 billion, up 29% from a year earlier and 25% on an organic basis, as growth across commercial aerospace, industrial gas turbines and commercial transportation helped the company exceed the high end of its prior outlook.

Adjusted EBITDA increased 43% to $879 million, while the adjusted EBITDA margin expanded 310 basis points year over year to 32.5%. Adjusted earnings per share rose 54% to $1.46. Chief Executive Officer John Plant said the company delivered “solid” performance across all dimensions during the quarter.

Free cash flow was $562 million after $147 million of capital expenditures, which management described as a quarterly record. Howmet repurchased $500 million of stock during the quarter and reduced gross debt by $60 million, ending the period with net debt to EBITDA of approximately 1.3 times.

End Markets Post Broad Growth

Commercial aerospace revenue rose 32%, or 27% organically, driven by demand for original-equipment and spare parts. Patrick Winterlich, executive vice president and chief financial officer, said spare-parts demand continued to increase across both legacy and next-generation engine programs.

Total spares revenue increased 30% to about $570 million, representing approximately 21% of quarterly revenue. Plant said Howmet does not expect potentially higher travel costs to affect spare-parts deliveries through 2027, citing new-generation narrow-body engine time-on-wing issues, scheduled shop visits and aircraft production that has remained below prior plans.

Defense aerospace revenue rose 10%, including 3% organic growth, primarily due to spare-parts demand for legacy fighter platforms. Plant said F-35 spare-parts demand remained healthy as the fleet expands. He also said the company has not included potential inventory replenishment related to the Iran conflict in its outlook and is awaiting further clarity on missile-production agreements and future defense budgets.

Commercial transportation revenue rose 28%, supported by higher volumes as the North American market recovered and by higher aluminum-cost pass-through. Industrial gas turbine revenue climbed 45%, reflecting strong end-market demand and increased market share, according to management.

Segment Results

• Engine Products: Revenue increased 33% to $1.45 billion, led by 39% commercial aerospace growth and 44% gas turbine growth. EBITDA rose 57% to $567 million and margin expanded 580 basis points to 39.1%. The segment added approximately 520 net new employees during the quarter.
• Fastening Systems: Revenue rose 41% to $630 million, including contributions from the CAM and Brunner acquisitions. Excluding acquisitions, segment revenue increased 10%. EBITDA increased 34% to $185 million, while margin declined 140 basis points year over year, reflecting the mix impact of CAM.
• Engineered Structures: Revenue declined 4% to $295 million due to the divestiture of the Savannah Disc forging facility. Excluding that impact, revenue grew 8%. EBITDA increased 9%, and margin expanded 290 basis points to 23.7%.
• Forged Wheels: Revenue rose 32%, driven by volume gains and aluminum-cost pass-through. EBITDA increased 18% to $86 million, while margins declined because of the dilutive impact of higher aluminum pass-through revenue.

Gas Turbine Demand Drives Investment Plans

Plant said Howmet’s industrial gas turbine business is seeing demand from industrial users, oil and gas applications and data centers. The company now expects to double industrial gas turbine sales from its 2025 base within three years, rather than its previous three-to-five-year expectation. Plant said sales could reach roughly 2.5 times the 2025 level within five years, or about $2.5 billion by the end of the decade.

Management said recently installed gas-turbine capacity is sold out, while some customers have indicated that production through 2031 is fully booked and 2032 capacity may also be committed soon. Howmet expects elevated capital spending to continue as it adds capacity, while maintaining its focus on free-cash-flow conversion and avoiding additional debt.

Plant said the company’s industrial gas turbine margins are broadly similar to its aerospace margins, though higher growth could provide additional fixed-cost leverage. He emphasized that Howmet intends to maintain long-term customer relationships rather than pursue short-term pricing gains during the current supply-demand imbalance.

On aerospace turbine-blade competition and customer vertical-integration efforts, Plant said Howmet continues to invest in technology, quality and capacity. He said the company is positioned to add capacity for GE and is in discussions related to future blade industrialization programs. Plant also noted that Howmet expects continued content, original-equipment and spare-parts opportunities as engine makers pursue higher-temperature, more fuel-efficient designs.

Guidance Raised; 2027 Outlook Introduced

Howmet raised its full-year 2026 outlook to revenue of approximately $10.3 billion, plus or minus $10 million; EBITDA of $3.33 billion, plus or minus $5 million; adjusted earnings per share of $5.50, plus or minus $0.01; and free cash flow of $2 billion, plus or minus $50 million.

For the fourth quarter, the company expects revenue of about $2.75 billion, EBITDA of $900 million and adjusted earnings per share of $1.50.

Management also introduced an initial 2027 revenue outlook of approximately $11.5 billion, representing growth of 12% plus or minus 0.5%. The company said it will provide further refinement of the forecast, including aircraft-volume assumptions, during its February 2027 earnings call.

Howmet repurchased $1.1 billion of shares year to date at an average price of $251 per share, including $500 million bought during the third quarter at an average price of $265 per share. The board increased the company’s share-repurchase authorization by an additional $5 billion. The quarterly dividend was also raised 17% to $0.14 per share.

About Howmet Aerospace (NYSE:HWM)

Howmet Aerospace Inc NYSE: HWM is a global manufacturer of advanced engineered products and materials primarily serving the aerospace, defense, commercial transportation and industrial markets. The company develops components designed to operate in demanding environments where strength, durability and weight reduction are important.

Howmet's product portfolio includes aircraft engine components, airframe structures, titanium and nickel-based forgings, fastening systems and wheels for commercial vehicles.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.