Howmet Aerospace (HWM -1.16%) stock is up a whopping 75% in 2024 and rose 14.7% in the last week to Friday morning trading. The latest leg up is due to its impressive second-quarter earnings release earlier this week.
Howmet's end markets
The company generates around 52% of its sales from commercial aerospace and 16% from defense aerospace, with commercial transportation at about 18%. The remaining 14% is under the "industrial and other" heading. Its crucial end markets are jet engine components, aerospace fastening systems, and airframe structural components.
Key customers include aerospace and defense giants GE Aerospace (12% of 2023 revenue) and RTX (9%). While it's no secret that end market demand for airplanes (commercial or defense) remains robust, and manufacturers like Boeing and Airbus have multiyear backlogs, there are questions about delivery rates.
Boeing's delivery issues are well documented, and Airbus recently lowered its guidance for airplane deliveries. Moreover, this year, GE Aerospace has significantly reduced its 2024 guidance for production of the LEAP engine, which powers the Airbus A320 neo and the Boeing 737 MAX.
Howmet's earnings dispel fears
That said, Howmet beat expectations for the second quarter, and management raised its full-year revenue, earnings, and cash-flow guidance. Instead of a baseline case of $2.35 in earnings per share (EPS), management now expects $2.55.
Image source: Boeing.
Discussing the airplane volume issue on the earnings call, CEO John Plant said that, despite slowing its production, Airbus was still increasing its requirements. Meanwhile, parts orders at Boeing "continue to be at levels above the actual 737 and 787 build rates."
Indeed, Boeing expects a recovery in build rates on the 737 MAX to hit 38 a month by year-end. That would be good news for Howmet, and it can continue its strong operational performance.
