• Revenue: Record revenue increased 6% year-over-year.
• EBITDA Margin: 28.8%, up 480 basis points year-over-year.
• Operating Margin: 25.3%, up 500 basis points year-over-year.
• Free Cash Flow: $134 million, a record for the first quarter.
• Earnings Per Share (EPS): $0.86, up 51% year-over-year.
• Commercial Aerospace Revenue: Up 9% year-over-year.
• Defense Aerospace Revenue: Up 19% year-over-year.
• Commercial Transportation Revenue: Down 14% year-over-year.
• Industrial and Other Markets Revenue: Up 10% year-over-year.
• Engine Segment Revenue: $996 million, up 13% year-over-year.
• Fastening Systems Revenue: $412 million, up 6% year-over-year.
• Engineered Structures Revenue: $282 million, up 8% year-over-year.
• Forged Wheels Revenue: Down 13% year-over-year.
• Net Debt to EBITDA: Record low of 1.4 times.
• Cash Balance: $537 million at quarter-end.
• Share Buyback: $125 million in Q1, $100 million in April.
• Quarterly Dividend: Increased 25% to $0.10 per share.

• Warning! GuruFocus has detected 5 Warning Signs with RAMPF.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Howmet Aerospace Inc (NYSE:HWM) reported a record revenue increase of 6% year-over-year, with all segments showing growth.
• EBITDA margin reached 28.8%, with operating margin up 500 basis points year-over-year.
• Free cash flow was a positive $134 million, marking a record for the first quarter.
• Commercial Aerospace revenue grew by 9% year-over-year, driven by strong demand for engine spares.
• Defense Aerospace saw robust growth of 19% year-over-year, supported by demand for F-35 fighter jet engine spares.

Negative Points

• Commercial Transportation revenue declined by 14% in the first quarter, reflecting challenges in the sector.
• The expected increase in Commercial Truck builds in the second half is now uncertain due to North American economic uncertainties.
• Tariffs have increased uncertainty and reduced confidence in air travel, impacting Howmet Aerospace Inc (NYSE:HWM)'s outlook.
• Wide-body aircraft production ramp-up has been slower than expected, affecting Fastening Systems and Engineered Structures.
• The company faces potential impacts from tariffs, with a gross impact estimated at $80 million and a net impact of less than $15 million in 2025.

Q & A Highlights

Q: How does air traffic growth impact Howmet Aerospace's outlook, considering the IATA's recent global growth figures? A: John Plant, CEO, explained that while air traffic growth is important for future demand, Howmet is protected by the high backlog of aircraft manufacturers. The current economic policies in the US create some uncertainty, but strong demand in defense and data centers provides additional strength. The demand for spares remains high, and Howmet is focused on maintaining a strong balance sheet to navigate uncertainties.

Q: Can you provide an update on the progress of yield on upgraded 1A blades and the timing of the one blade upgrade certification? A: John Plant, CEO, stated that production is progressing well and is ahead of engine manufacturer requirements. The LEAP-1A and GTF Advantage are certified, with the LEAP-1B expected to be certified by the end of the year. The final cutover date is anticipated as we move into 2026.

Q: What drove the improved margins in Fastening Systems and Engineered Structures, and are these sustainable? A: John Plant, CEO, highlighted improved process control and productivity as key drivers. The company has exited underperforming businesses, leading to a positive mix effect. The improvements are sustainable, and the company aspires to maintain high margins, especially as demand in defense and wide-body aircraft increases.

Q: How is Howmet Aerospace addressing the impact of tariffs, and what is the expected financial impact? A: John Plant, CEO, explained that the gross impact of tariffs could be around $80 million, but after mitigation and pass-through efforts, the net impact is expected to be less than $15 million in 2025. The company is utilizing trade programs to minimize the impact and has secured customer agreements to cover tariffs.

Q: Can you segment the 33% spares growth by end market, and is the destocking headwind for cold section engine parts in the LEAP engine resolved? A: John Plant, CEO, noted that commercial aerospace and defense saw over 40% growth in spares, while IGT and oil and gas saw about 15% growth. The destocking headwind for LEAP engine parts is not fully resolved but is expected to improve as production increases in the latter half of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.