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    HWM
    Earnings call· Mar 2026(Q1 FY26)

    Howmet Aerospace Q1 FY26 earnings call HWM

    May 7, 2026 Source

    Executive summary

    Howmet Aerospace Q1 FY26 — Record EBITDA Margin and Strong Cash Flow

    Howmet Aerospace delivered a very strong Q1 FY26, marked by record EBITDA margins and robust free cash flow generation, driven by accelerating commercial aerospace demand and gas turbine growth. The company strategically expanded its Fasteners portfolio through acquisitions while divesting non-core assets, positioning for future organic growth despite macroeconomic uncertainties and increased interest expenses.

    Highlights

    5

    • Sales increased 19% to $2.31 billion, marking the strongest quarterly growth since Q1 2023.

    • EBITDA grew 32% to $740 million, with the EBITDA margin expanding 320 basis points to a record 32%.

    • Free cash flow reached a record $359 million for a first quarter, reflecting strong earnings and improved working capital.

    • Commercial Aerospace engine spares revenue surged 48%, contributing to overall spares revenue reaching 23% of total revenue.

    • Fitch upgraded Howmet's credit rating to A-, now four notches into investment grade, reflecting improved leverage and strong free cash flow.

    Concerns

    3

    • Commercial Transportation revenue, on a volume basis, was down 11% as the market down cycle continued into the quarter.

    • The increased interest expense from the CAM acquisition makes the EPS effect in 2026 insignificant, with positive impact expected only from 2027.

    • Ongoing uncertainty related to the situation in Iran and its potential to cause oil price shocks, higher inflation, and impacts on global interest and currency exchange rates.

    Guidance & targets

    17
    CategoryTargetConfidence
    Q2 FY26 Revenue
    $2.4 billion +/- $10 million
    high materiality
    High
    Q2 FY26 EBITDA
    $765 million +/- $5 million
    high materiality
    High
    Q2 FY26 EPS
    $1.23 +/- $0.01
    high materiality
    High
    Full Year 2026 Revenue
    $9.65 billion +/- $75 million
    high materiality
    High
    Full Year 2026 Revenue Growth (excluding M&A)
    14%
    high materiality
    High
    Full Year 2026 EBITDA
    $3.06 billion +/- $35 million
    high materiality
    High
    Full Year 2026 EPS
    $4.94 +/- $0.06
    high materiality
    High
    Full Year 2026 Free Cash Flow
    $1.75 billion +/- $50 million
    high materiality
    High
    Full Year 2026 Capital Expenditure
    ~$500 million
    medium materiality
    Medium
    737 Production Rate
    average of 42 per month
    medium materiality
    Medium
    787 Production Rate
    7 per month, rising to 8 per month by the fourth quarter
    medium materiality
    Medium
    A320 Production Rate
    62 per month
    medium materiality
    Medium
    A350 Production Rate
    6 per month
    medium materiality
    Medium
    Gas Turbine Demand Growth
    doubling of demand
    medium materiality
    High
    Dividend Distributions
    higher than 2025
    medium materiality
    High
    Net Leverage
    decay rapidly to -- back towards the 1 level
    high materiality
    High
    EPS Impact from CAM Acquisition
    positive earnings per share impact
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Engine Products
    Delivered excellent revenue, EBITDA, and EBITDA margin. Demand strong across all engine markets with very healthy engine spares volume. Recast to reflect titanium alloy production move.
    EBITDA: $458 millionEBITDA Growth: 44%Commercial Aerospace Growth: 31%Defense Aerospace Growth: 13%Gas Turbines Growth: 39%Net New Employees Absorbed: ~235
    		$1.25 billion29%—36.6%
    Fastening Systems
    Another strong quarter with EBITDA outpacing revenue growth despite modest wide-body aircraft recovery and Commercial Transportation weakness. Continued to drive commercial and operational performance.
    EBITDA: $150 millionEBITDA Growth: 18%Commercial Aerospace Growth: 17%Defense Aerospace Growth: 21%Commercial Transport Growth: -4% (representing ~11% of revenue)
    		$471 million14%—31.8%
    Engineered Structures
    Operational performance continues to improve, with revenue decrease due to product rationalization and focus on higher-margin opportunities. Optimized manufacturing footprint and product mix. Recast to reflect titanium alloy production move.
    EBITDA: $66 millionEBITDA Growth: flatEBITDA Margin Increase: 40 bps
    		$294 million-3%—22.4%
    Forged Wheels
    Solid quarter despite challenging market. Revenue growth driven by higher aluminum cost and tariff pass-through and favorable foreign currency, offsetting volume decrease. Flexing costs, strong product mix, and favorable FX contributed to margin increase.
    EBITDA: $90 millionEBITDA Growth: 32%Volume Decrease: 11%
    		—17% (revenue)—30.5%

    Operational metrics

    22
    EBITDA margin
    32%+320 bps YoY
    Q1 FY26

    Record EBITDA margin for the quarter.

    Incremental flow-through (revenue to EBITDA)
    49%YoY
    Q1 FY26

    Solid incremental flow-through of revenue to EBITDA.

    Free cash flow conversion
    90%
    long-term commitment

    Maintaining long-term commitment to net income conversion.

    Net debt to trailing EBITDA
    0.9x
    prior to CAM acquisition

    Improved leverage prior to the CAM acquisition.

    Net debt to trailing EBITDA
    1.6x
    post-CAM acquisition

    Leverage after funding the CAM acquisition.

    Remaining share repurchase authorization
    $1.05 billion
    as of call date

    Authorization from the Board of Directors for future share repurchases.

    Share buyback executed
    $300 million
    Q1 FY26

    Repurchased common stock during the first quarter.

    Share buyback executed
    $150 million
    April 2026

    Additional share repurchases made in April.

    Dividend per share
    $0.12
    Q1 FY26

    First quarter dividend paid.

    Commercial Aerospace engine spares growth
    48%
    Q1 FY26

    Strong growth in engine spares, contributing significantly to overall revenue.

    Total spares revenue
    $520 million+36%
    Q1 FY26

    Combined spares revenue from Commercial Aerospace, Defense Aerospace, and Gas Turbines.

    Spares revenue as percentage of total revenue
    21%
    FY25

    Spares revenue percentage for the full year 2025.

    Spares revenue as percentage of total revenue
    11%
    FY19

    Spares revenue percentage for the full year 2019.

    Engine Products net new employees
    ~235
    Q1 FY26

    Net new employees absorbed in the Engine Products segment to support continued growth.

    Total net new employees
    >1,000
    FY26

    Anticipated total net new employee additions for the full year 2026.

    Titanium alloy production operation
    moved
    Q1 FY26

    Moved for better operational alignment; comparable periods have been recast.

    Commercial Transportation volume
    -11%
    Q1 FY26

    Volume decrease in the Commercial Transportation market.

    Revenue contribution from M&A (net)
    $275 million
    remainder of 2026

    Net effect of CAM and Brunner acquisitions and Savannah divestiture on revenue for the rest of the year.

    EBITDA contribution from M&A (net)
    $60 million
    remainder of 2026

    Net effect of CAM and Brunner acquisitions and Savannah divestiture on EBITDA for the rest of the year.

    Rare earths inventory coverage
    fully covered
    through 2026

    Increased inventory for security.

    Rare earths inventory coverage
    90%
    2027

    Increased inventory for security.

    Rare earths inventory coverage
    well through the end of the decade
    end of decade

    Increased inventory for security for some products.

    Industry KPIs

    8
    MetricValueDetails
    Free cash flow bridge$359 millionUSD
    Defense program awardsexpanding efforts
    Program segment backlogrecord backlog
    Aftermarket services split23%
    Unit deliveries by program42units per month
    Production rates by program7units per month
    Production capacity expansiondoubling of demand
    Engine shop visits mro installed basebacklogged

    Orderbook & backlog

    2
    Commercial Aerospace new aircraft backlogrecord backlogQ1 FY26

    Underpins current build rates for new, more fuel-efficient aircraft.

    MRO slots backlogbackloggedQ1 FY26

    Indicates strong demand for engine maintenance, repair, and overhaul.

    Deals & partnerships

    3
    Brunneracquisition$120 million

    Acquisition of a Fastener business based in Wisconsin, funded by cash on hand.

    CAMacquisition$1.8 billion

    Acquisition of a Fastener business, expanding reach and portfolio of offerings to non-traditional fasteners. Financed using $1.65 billion of new debt (including $1.2 billion new notes and $450 million commercial paper) and proceeds from the Savannah divestiture.

    Unnamed buyerdivestiture$230 million

    Sale of the Disk Forging operation in Savannah, Georgia, which was an isolated U.S. disk operation with no plans for expansion.

    Capital programs

    1
    Gas Turbine Capacity Expansion (Japan Plant)underway
    Period spend: ~$500 million (FY26 CapEx)
    Funding: strong future free cash flow
    Start: 2024

    Benefit: double or more than double revenue from this particular segment

    Investment in new manufacturing plant in Japan, with first equipment arriving and being assembled into working casting furnaces. Capacity increases expected progressively through 2026, 2027, and a further wave affecting late 2028-2029. Focus on yield improvement and shift from batch to flow production.

    Risks & headwinds

    4
    Geopolitical uncertainty and its impact on oil prices and inflationOngoing

    Outcome and consequences of the situation in Iran yet to be fully determined; oil price shock rippling around the world; case for higher inflation is set.

    Mitigation: Management believes the enormous backlogs for spares demand will help mitigate immediate impacts on the company's guidance.

    Macroeconomic outlook and its effects on global interest rates and currency exchange rates2026 and beyond

    Rise and forward trajectory of inflation and its effects on global interest rates and currency exchange rates are yet to be determined.

    Mitigation: Company acknowledges increased uncertainties but sees a clear path to improved economic outcome in 2026 and future growth into 2027.

    Commercial Transportation market down cycleQ1 FY26, beginning to improve in Q2

    Commercial Transportation revenue (volume basis) was down 11% in Q1 FY26.

    Mitigation: Company continues to outperform the market with premium products, flexing costs, and a strong product mix. Outlook remains cautious until a more stable macroeconomic environment.

    Increased interest expense from CAM acquisitionFY26

    The EPS effect in 2026 is insignificant due to the increased interest expense.

    Mitigation: Expected to have a positive earnings per share impact starting in 2027. Net leverage is expected to be brought down significantly through the balance of 2026.

    Q&A highlights

    7

    What factors drove the strong 20% Commercial Aerospace growth, especially in Engine Products, and how much are new engine programs like GTF Advantage and LEAP-1B Maverick contributing?

    John Plant attributed the strong Engine Products growth to being ahead of future volume increases, robust spares demand (up 48%), share gains, and price increases. He detailed that GTF Advantage production is steadily increasing through 2026 and significantly in 2027, offering higher content. LEAP-1B Maverick production is just starting, with volumes increasing through Q2-Q4, and full changeover expected by year-end 2026.

    “So if you put strong spares along with the aircraft build, the anticipated build, the share, the price, there's a lot of very positive things happening for us in the Engine business.”

    asked by Scott Deuschle · answered by John Plant

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Portfolio Optimization

    Howmet executed strategic portfolio adjustments in Q1 FY26, acquiring Brunner for $120 million and CAM for $1.8 billion to expand its Fasteners business. Concurrently, the company divested its Savannah Disk Forging Facility for $230 million. These actions align with a strategy to reallocate capital towards higher-growth, higher-margin opportunities, with the CAM acquisition projected to add $275 million in revenue and $60 million in EBITDA for the remainder of 2026.

    02

    Strong Commercial Aerospace and Gas Turbine Demand

    The company experienced robust demand in key markets, with Commercial Aerospace revenue growing 20%, significantly boosted by a 48% increase in engine spares. Gas Turbine revenue surged 39%, driven by rising electricity demand from data centers. The combined spares revenue from Commercial Aerospace, Defense Aerospace, and Gas Turbines increased 36% to $520 million in Q1, now representing 23% of total revenue, up from 21% in FY25.

    03

    Capital Deployment and Financial Strength

    Howmet generated a record $359 million in free cash flow during Q1, supporting $300 million in share buybacks in the quarter and an additional $150 million in April. Post-CAM acquisition, net leverage stands at 1.6x, with a clear plan to reduce it towards 1x by year-end. Fitch upgraded the company's credit rating to A-, four notches into investment grade, reflecting its improved leverage and strong cash flow profile.

    04

    Gas Turbine Capacity Expansion and Outlook

    Howmet is making significant capital investments in its Gas Turbine segment, with 2026 CapEx now projected around $500 million, and further increases expected in 2027. This investment aims to double or more than double revenue from this segment. New manufacturing capacity in Japan is expected to begin production by Q4 2026, with further production increases planned through 2027-2029, driven by strong customer demand and finalized commercial agreements with 6 of 7 major customers.

    05

    Supply Chain and Human Capital Management

    Management has proactively strengthened its supply chain, particularly for rare earth materials, achieving full coverage through 2026 and 90% coverage for 2027, with some products secured through the end of the decade. The company continues aggressive recruitment, adding 230-250 net new employees in Q1 and targeting over 1,000 for FY26, while also focusing on improving employee retention through enhanced training, workplace environment, and automation initiatives.

    06

    Market Outlook and Macroeconomic Caution

    While maintaining strong growth expectations for Commercial Aerospace and Gas Turbines, management expressed caution regarding the broader macroeconomic outlook. Concerns include potential impacts from the Iranian situation on oil prices, inflation, and interest rates. The Commercial Transportation market, though showing signs of strengthening in Q2, remains modest in the company's full-year outlook due to economic uncertainties.

    AI-generated summary of the company’s earnings call. Not investment advice.