Skip to content
    HWM
    Earnings call· Jun 2025(Q2 FY25)

    Howmet Aerospace Q2 FY25 earnings call HWM

    Jul 31, 2025 Source

    Executive summary

    Howmet Aerospace Q2 FY25 — Record Revenue and Increased Full-Year Guidance Driven by Strong Aerospace and Industrial Demand

    Howmet Aerospace delivered a "crazy good" second quarter, achieving record revenue and profitability, primarily driven by robust demand in commercial aerospace, defense, and industrial markets. The company successfully navigated destocking in certain aerospace segments and continued softness in commercial transportation, leveraging strong spares growth and operational efficiencies. Management raised its full-year guidance, reflecting confidence in sustained demand and the benefits of strategic capacity investments, particularly in the Engines segment.

    Highlights

    5

    • Q2 FY25 revenue increased 9% year-over-year to a record $2.53 billion, exceeding the high end of guidance.

    • Adjusted EBITDA grew 22% year-over-year to $589 million, with margins expanding 300 basis points to 28.7%.

    • Free cash flow reached a record $344 million in Q2, enabling $175 million in share repurchases and $76 million in debt repayment.

    • Adjusted EPS increased 36% year-over-year to $0.91.

    • Full-year FY25 guidance was raised across all key metrics, including revenue to $8.13 billion, EBITDA to $2.32 billion, EPS to $3.60, and free cash flow to $1.225 billion.

    Concerns

    3

    • Commercial Transportation revenue was down 4% year-over-year, with wheels volume down 11%, and continued softness is expected in H2 FY25.

    • Commercial Aerospace revenue in Engineered Structures was down 6% due to destocking and product rationalization.

    • The company is absorbing costs from approximately 400 net headcount additions in Q2, primarily in the Engines segment, which creates a near-term margin drag.

    Guidance & targets

    11
    CategoryTargetConfidence
    Q3 FY25 Revenue
    $2.03B +/- $10M
    medium materiality
    High
    Q3 FY25 EBITDA
    $580M +/- $5M
    medium materiality
    High
    Q3 FY25 EPS
    $0.90 +/- $0.01
    medium materiality
    High
    Full-Year FY25 Revenue
    $8.13B +/- $50M
    high materiality
    High
    Full-Year FY25 EBITDA
    $2.32B +/- $20M
    high materiality
    High
    Full-Year FY25 EPS
    $3.60 +/- $0.04
    high materiality
    High
    Full-Year FY25 Free Cash Flow
    $1.225B +/- $50M
    high materiality
    High
    Full-Year FY25 Incremental Margin
    mid-50%
    medium materiality
    High
    Boeing 737 MAX Build Rate Assumption
    33 per month average
    high materiality
    High
    Combined IGT, Oil & Gas, and Industrial Markets Growth
    high single digits
    medium materiality
    Medium
    Commercial Truck Market Outlook
    stabilize
    low materiality
    Medium

    Segment performance

    18
    SegmentRevenueYoYQoQMargin
    Engine Products
    Delivered record revenue, EBITDA, and EBITDA margin. Strong demand across all markets, with record engine spares volume. Absorbed costs from significant headcount additions.
    EBITDA: $349MEBITDA growth YoY: 20%EBITDA margin change YoY: +170 bpsNet new employees in Q2: 360Net new employees YTD: 860
    		$1.056B13%—33% EBITDA margin
    Engine Products - Commercial Aerospace
    Driven by engine spares growth.
    		—9%——
    Engine Products - Defense Aerospace
    Driven by engine spares growth.
    		—13%——
    Engine Products - Oil & Gas
    Strong demand.
    		—25%——
    Engine Products - IGT
    Strong demand.
    		—25%——
    Fastening Systems
    Delivered strong quarter despite sluggish wide-body aircraft builds and commercial transportation weakness. Expanded margins through commercial and operational performance.
    EBITDA: $126MEBITDA growth YoY: 25%EBITDA margin change YoY: +360 bps
    		$431M9%—29.2% EBITDA margin
    Fastening Systems - Commercial Aerospace
    Strong growth.
    		—18%——
    Fastening Systems - Defense Aerospace
    Strong growth.
    		—19%——
    Fastening Systems - General Industrial
    Decline.
    		—-11%——
    Fastening Systems - Commercial Transportation
    Weakness.
    Share of segment revenue: 13%
    		—-18%——
    Engineered Structures
    Performance continues to improve. Optimized manufacturing footprint and rationalized product mix to maximize profitability.
    EBITDA: $62MEBITDA growth YoY: 55%EBITDA margin change YoY: +690 bps
    		$290M5%—21.4% EBITDA margin
    Engineered Structures - Commercial Aerospace
    Due to destocking and product rationalization.
    		—-6%flat—
    Engineered Structures - Defense Aerospace
    Primarily driven by the end of F-35 program destocking.
    		—49%——
    Forged Wheels
    Maintained strong EBITDA margin by flexing costs despite lower volume and higher aluminum costs.
    Volume (excluding metal impacts): down 11%
    		down slightly——27.5% EBITDA margin
    Commercial Aerospace (Company-wide)
    Driven by accelerating demand for engine spares and record backlog for new aircraft. Experienced some further destocking in certain product areas.
    		—8%——
    Defense Aerospace (Company-wide)
    Record quarterly revenue. Growth driven by engine spares, new engine builds, and F-35 structures.
    		$352M21%——
    Commercial Transportation (Company-wide)
    Challenging market, including pass-through of higher aluminum costs. Expected continued softness in H2 FY25.
    Volume (wheels): down 11%
    		down 4%———
    Industrial and Other (Company-wide)
    Driven by Oil & Gas (up 26%) and IGT (up 25%).
    		—17%——

    Operational metrics

    13
    Adjusted EBITDA Margin
    28.7%+300 bps YoY
    Q2 FY25

    Healthy margins despite significant sequential revenue and EBITDA growth, absorbing costs of additional headcount.

    Net Debt to Trailing EBITDA
    1.3xrecord low
    Q2 FY25

    Balance sheet continues to strengthen.

    Cash Balance
    $546M
    Q2 FY25

    Healthy cash balance at quarter-end.

    Capital Expenditures
    $100M
    Q2 FY25

    Accelerated investment for growth in commercial aerospace and IGT, backed by customer contracts.

    Debt Repayment
    $76M
    Q2 FY25

    Additional paydown of debt.

    Common Stock Dividend
    $0.12+20% QoQ
    Q3 FY25

    Increased from $0.10 per share, building on significant increases in 2023 and 2024.

    Adjusted EPS
    $0.91+36% YoY
    Q2 FY25

    Strong earnings performance.

    Total Capital Deployed
    $292M
    Q2 FY25

    Cash deployed to shareholders and debt reduction.

    Share Repurchases
    $175M17th consecutive quarter
    Q2 FY25

    Consistent return of capital to shareholders.

    Diluted Share Count
    406Mrecord Q2 exit rate
    Q2 FY25

    Improved due to share repurchases.

    Tariff Drag
    below $5M
    Q2 FY25

    Reduced impact, primarily a timing issue between incurring costs and receiving compensation.

    Spares Revenue (Commercial Aero, Defense Aero, IGT, Oil & Gas)
    40%YoY
    Q2 FY25

    Accelerating growth in key spares markets.

    PCC Fastener Accident Orders
    $40Mup from $25M
    Q2 FY25

    Increased orders for Howmet due to the accident at Precision Castparts' facility.

    Industry KPIs

    3
    MetricValueDetails
    Aftermarket services split20%%
    Unit deliveries by program33aircraft/month
    Production rates by program38aircraft/month

    Capital programs

    4
    Michigan Turbine Airfoils Plantessentially completed

    Benefit: turbine airfoils output

    New plant for turbine airfoils, with equipment arriving and some salable output expected in Q4 FY25.

    Tennessee Plant Extensionunderway

    Extension supporting the Michigan turbine airfoils capacity.

    Japan Industrial Gas Turbine Plantconstruction not completed until end of CY25

    Benefit: large industrial gas turbines output

    Brand-new manufacturing plant for large industrial gas turbines, with facilitization in Q1/Q2 CY26.

    Europe Industrial Gas Turbine Plant Extensionunderway

    Benefit: industrial gas turbines output

    Extension of an existing plant for industrial gas turbines, with expansion and capitalization similar to the Japan plant timeframe.

    Risks & headwinds

    4
    Commercial Transportation Market Softnessexpected to continue throughout FY25

    Revenue down 4% YoY, wheels volume down 11% in Q2 FY25

    Mitigation: Wheels team flexed costs to hold EBITDA to prior year levels and deliver strong EBITDA margin of 27.5%.

    Headcount Addition Cost Dragnear-term

    Approximately 400 net headcount additions in Q2 FY25 (360 in Engines segment)

    Mitigation: Costs are currently being absorbed and offset by leverage from increased volumes; expected to smooth out in H2 2026 and 2027 as new capacity comes online.

    Commercial Aerospace DestockingQ2 FY25, some destocking still layered into Q3 FY25 outlook

    Commercial Aerospace revenue in Engineered Structures down 6% YoY due to destocking and product rationalization

    Mitigation: Underlying growth in other areas (spares) was sufficient to maintain overall commercial aerospace business in positive growth territory; company is powering through.

    Narrow-body Engine Supply BottleneckH2 FY25 and into 2026

    Airbus reportedly has 60 A320s awaiting engines

    Mitigation: Howmet is closely monitoring production rates of LEAP and GTF engines; assumes engine production rates will significantly increase.

    What to watch in Q3 FY25

    5

    Michigan Turbine Airfoils Plant Output

    Q4 FY25
    Currentsome output expected
    Targetsalable output in Q4 FY25

    Why it matters

    This is the first new plant coming online, indicating the initial realization of strategic capacity investments and potential for future revenue growth.

    The first plant that we have essentially completed now in terms of the construction and equipment that has been arriving is in our Michigan facilities. And I'm expecting some outputs from that, that's salable output in the fourth quarter of the year going into 2026.

    Q&A highlights

    5

    Can you elaborate on the impact of product rationalization in Structures on margins and revenue, and whether current margin levels are sustainable?

    The majority of rationalization in Structures has already occurred, including a business sale and a plant closure. These actions, combined with discerning order intake, have solidified margins. While not expecting significant further rationalizations, the company remains alert for non-contributing lines. Current margin levels are expected to be maintained, contributing to the overall EBITDA outlook.

    “The majority of the rationalization has already occurred on this, Myles. And so if you go back to commentary provided in the two prior earnings calls, I mentioned the sale of one business within structures and also the closure of another manufacturing plant, which was in Europe.”

    asked by Myles Walton · answered by John Plant

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Capacity Expansion and Future Growth

    Howmet is investing significantly in new manufacturing capacity, particularly in its Engine Products segment. Two new plants and two significant extensions are underway, with the first new plant in Michigan expected to begin salable output in Q4 FY25 for turbine airfoils. A new IGT plant in Japan and an extension in Europe are slated for completion by end of CY25, with facilitization in Q1/Q2 CY26 and full production by CY27. These investments are backed by customer contracts and are expected to drive revenue growth in FY26 and FY27, with CapEx remaining elevated through FY26.

    02

    F-35 Program Dynamics and Defense Strength

    The F-35 program continues to be a strong contributor, with the spares business for engine products now exceeding OE production, a tipping point anticipated for several years. The Structures business, specifically the Bulkheads division, has normalized its order intake to a 1:1 rate with Lockheed's production after a period of destocking. Management expects solid F-35 production rates of 150 aircraft per year through the end of the decade, supported by international programs, with Block V enhancements anticipated around 2028.

    03

    Commercial Aerospace Build Rates and Supply Chain

    The company's guidance incorporates a raised Boeing 737 MAX build rate assumption to an average of 33 per month for FY25, assuming a consistent rate of 38 per month for the remainder of the year. The 787 is expected to average around six per month, moving to seven per month in H2. Airbus A320 builds have been solid, but uncertainty remains regarding engine supply, with approximately 60 A320s currently awaiting engines. Management is closely monitoring narrow-body engine production as a potential bottleneck for industry ramp-ups.

    04

    Tariff Impact and Mitigation

    The tariff drag experienced by Howmet Aerospace has improved, with the net effect now expected to be below $15 million for the full year. In Q2 FY25, the tariff drag was significantly below $5 million, primarily due to timing difference📎s between incurring costs and receiving customer compensation. The Fastening Systems segment experienced the highest tariff drag, but management expects recovery throughout the year, indicating that the issue is not a significant concern for overall profitability.

    05

    Capital Deployment and Shareholder Returns

    Howmet continues its robust capital deployment strategy, repurchasing $175 million of common stock in Q2 at an average price of approximately $142 per share, and an additional $100 million in July at $183 per share. The company also repaid $76 million in debt and increased its common stock dividend by 20% to $0.12 per share, payable in August. With a remaining share repurchase authorization of $1.8 billion, the company prioritizes organic growth investments for capital deployment, viewing it as the most effective use of capital for shareholder returns.

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