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    HWM
    Earnings call· Jun 2026(Q2 FY26)

    Howmet Aerospace Q2 FY26 earnings call HWM

    Aug 6, 2026 Source

    Executive summary

    Howmet Aerospace Q2 FY26 — Strong Organic Growth and Margin Expansion Driven by Commercial Aero and Gas Turbines

    Howmet Aerospace delivered a robust second quarter, marked by strong organic revenue growth and significant adjusted EBITDA margin expansion, primarily fueled by demand in commercial aerospace and gas turbine markets. The company continued its aggressive capital deployment strategy, including substantial share repurchases and a dividend increase, while also integrating the CAM acquisition. Management anticipates continued growth, supported by increased capital expenditures for capacity expansion, aiming for a return to target leverage levels by year-end.

    Highlights

    5

    • Total revenue increased 24% year-over-year, with organic growth of 21% in Q2 FY26.

    • Adjusted EBITDA margin expanded by 340 basis points year-over-year to 32.1% in Q2 FY26.

    • Adjusted EPS grew 46% year-over-year to $1.33 in Q2 FY26.

    • Free cash flow was just under $0.5 billion in Q2 FY26, totaling approximately $840 million for the first half.

    • The company repurchased $300 million in shares during Q2 FY26, bringing year-to-date repurchases to $800 million.

    Concerns

    4

    • Commercial Transportation wheels volume declined 8% year-over-year in Q2 FY26.

    • Forged Wheels EBITDA margin decreased 270 basis points sequentially due to the dilutive effect of sharply higher aluminum cost pass-through.

    • Fastening Systems EBITDA margin declined sequentially, driven by the initial absorption of the CAM acquisition.

    • Capital expenditure requirements are increasing, expected to exceed $500 million in FY26 and further increase in FY27.

    Guidance & targets

    10
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $2.75 billion +/- $10 million
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $830 million +/- $5 million
    high materiality
    High
    Q3 FY26 Adjusted EPS
    $1.35 +/- $0.01
    high materiality
    High
    Full-year FY26 Revenue
    $10.05 billion +/- $50 million
    high materiality
    High
    Full-year FY26 Adjusted EBITDA
    $3.23 billion +/- $20 million
    high materiality
    High
    Full-year FY26 Adjusted EPS
    $5.27 +/- $0.04
    high materiality
    High
    Full-year FY26 Free Cash Flow
    $1.9 billion +/- $50 million
    high materiality
    High
    Full-year FY27 Revenue
    Increase over 2026
    high materiality
    Medium
    Free Cash Flow Conversion
    90%
    medium materiality
    High
    Net Debt to Trailing EBITDA
    Approximately 1x
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Engine Products
    Delivered excellent revenue growth, EBITDA, and EBITDA margin. Absorbed approximately 485 net new employees in the quarter, positioning for future growth.
    EBITDA: $517 million (up 51% YoY)Commercial aerospace revenue growth: 37% YoYDefense aerospace revenue growth: 17% YoYGas turbine revenue growth: 38% YoY
    		$1.37 billion32%—37.7% EBITDA margin
    Fastening Systems
    Revenue growth includes the impact of CAM and Brunner acquisitions. Margins declined sequentially due to the addition of the CAM business.
    EBITDA: $177 million (up 40% YoY)Commercial Aerospace revenue growth: 39% YoYDefense aerospace revenue growth: 45% YoYCommercial transport revenue growth: flat YoYTotal fasteners growth (excluding acquisitions): double digits
    		$589 million37%—30.1% EBITDA margin
    Engineered Structures
    Revenue decline due to the divestiture of the Savannah Disc forging facility. Excluding Savannah, revenue growth was approximately flat. Continued focus on optimizing the segment for profitability.
    		$269 million-13%—23.8% EBITDA margin
    Forged Wheels
    Revenue increase driven by higher aluminum pass-through, offsetting lower volume. Higher metal pass-through diluted margins by approximately 360 bps YoY but had no material impact on EBITDA dollars. EBITDA dollars largely unchanged sequentially.
    EBITDA: $88 million (up 16% YoY)Volume change: down 8% YoYVolume change: up 7% sequentially
    		Up 14%14%—EBITDA margin up 30 bps YoY, down 270 bps sequentially

    Operational metrics

    20
    Organic Revenue Growth
    21%
    Q2 FY26

    Excluding the net impact of the three transactions completed this year.

    Organic Revenue Growth
    20%
    H1 FY26

    Excluding the net impact of the three transactions completed this year.

    Adjusted EBITDA Incremental Flow-through
    46%YoY
    Q2 FY26

    Incremental flow-through of revenue to EBITDA.

    Net Debt to Trailing EBITDA
    1.4x
    Q2 FY26

    Finished the quarter at 1.4x following the completion of the CAM acquisition.

    Cash Balance
    $564 million
    Q2 FY26

    Quarter-end cash balance.

    Total Liquidity
    $1 billion undrawn revolver complemented by a $1 billion commercial paper program
    Q2 FY26

    Liquidity remains strong.

    Capital Expenditures
    $104 million
    Q2 FY26

    Majority of capital spend continues to be in the Engine Products segment, investing for growth in aerospace and gas turbine markets, backed by customer contracts.

    Capital Expenditures
    exceed $500 million
    FY26

    Likely to exceed this amount for the full year.

    Share Repurchases
    $300 million
    Q2 FY26

    Repurchased common stock.

    Share Repurchases
    $200 million
    July 2026

    Additional repurchases in July.

    Share Repurchases
    $800 million
    YTD FY26

    Year-to-date repurchases.

    Remaining Share Repurchase Authorization
    $700 million
    As of call date

    From the Board of Directors.

    Quarterly Stock Dividend Increase
    17%
    Q3 FY26

    Increase in Q3 quarterly stock dividend.

    Annualized Interest Expense Savings
    $12 million
    Annualized

    Combined effect of paying down $186M Japanese yen term loan and entering a cross-currency swap for $300M notes due 2028.

    Industrial Gas Turbine Market Share
    in excess of 50%
    Current

    Howmet's market share in the IGT market.

    LEAP-1B New Technology Blade Cutover
    likely Q1 2027
    Q1 FY27

    Anticipated cutover to the new technology blade, with inventory being built during H2 2026.

    GTF Advantage Production Ramp
    increasing each quarter
    H2 FY26 into 2027

    Production for turbine blades and vanes is increasing, with a very large increase to be achieved in H2 2026 and even larger into 2027 for new engines and retrofit programs.

    Defense Spares Demand Increase
    anticipated
    2027

    Anticipated significant increase in spares demand from F-18s, 22s, F-35s, etc., but not yet seen in Q3/Q4 2026 and not assured by specific orders.

    CAM Acquisition EPS Effect
    breakeven
    FY26

    Due to debt servicing offsetting earnings.

    CAM Acquisition EPS Effect
    positive
    2027 and beyond

    Expected to start seeing positive EPS effect.

    Industry KPIs

    2
    MetricValueDetails
    Total company backlogincreased
    Aftermarket services split$560 millionUSD

    Orderbook & backlog

    5
    Total Aircraft BacklogincreasedQ2 FY26

    Overall backlog for new aircraft has increased, boding well for future build rates.

    Commercial Aerospace Orderscontinued to growQ2 FY26

    Orders for new aircraft have continued to grow despite Middle East issues.

    Commercial Truck Builds Order IntakepositiveQ2 FY26

    Positive order intake for commercial truck builds.

    Missile Business OutlookstrengtheningQ2 FY26

    Near-term outlook for missile business continues to strengthen, with demand increases seen or signaled for PAC-3, FAD, Tomahawk, and classified programs.

    Industrial Gas Turbine Demand Outlooksrevisited and added toQ2 FY26

    Some customers already wanting to revisit and add to their demand outlooks.

    Deals & partnerships

    2
    CAM FastenerFastener business$1.8 billion

    Completed on April 6. Integration focused on IT systems, benefit harmonization, and asset base improvement. Synergies expected in H2 FY26, majority in 2027.

    Brunner FastenerFastener business

    Completed in February. Mentioned alongside CAM as part of 'couple of billion dollars' in acquisitions this year.

    Capital programs

    4
    IGT Capacity Expansion - Japan Plantunderway

    Benefit: Additional IGT componentry

    Delivery of first new large casting machine into Japan, another to follow in H2 FY26. The new plant is already essentially fully spoken for.

    IGT Capacity Expansion - European Plantunderway

    Benefit: Additional IGT componentry

    Major expansion in Europe, referred to as a new plant.

    IGT Capacity Expansion - Virginia Plant (US)underway

    Benefit: Additional IGT componentry or titanium castings

    Building out capital in existing footprint in Virginia, creating additional space by exiting some nickel alloy work.

    Commercial Aerospace Plant Expansionannounced
    Start: Last week (July/August 2026)

    Benefit: Opportunity for further expansion to support increased commercial aerospace build rates

    Building of a new plant and major expansion of one of the sites to create opportunity for further expansion required by commercial aerospace demand.

    Risks & headwinds

    6
    Middle East Conflict ImpactQ2 FY26 onwards

    Increased volatility of jet fuel and gasoline prices; impacted recent commercial air traffic activity

    Mitigation: Howmet has not experienced any changes in cost of demand; airfreight volumes continued to strengthen.

    Interest Rate EnvironmentOngoing

    Interest rates have climbed, dimming outlook for near-term rate cuts

    Aluminum Cost Pass-ThroughQ2 FY26, likely to continue for next couple of quarters

    Sharply higher aluminum LME and Midwest premiums; diluted Forged Wheels margins by approximately 360 bps YoY

    Mitigation: Higher metal pass-through had no material impact on EBITDA dollars; EBITDA dollars largely unchanged sequentially.

    Supply Chain and Industry Capacity ConstraintsNext 3-5 years

    Weak links in the supply base could constrain build rate increases for aerospace OEMs

    Mitigation: Howmet is poised with additional capacities and is investing in new plants; continually monitoring aircraft backlogs and sustainability.

    CAM Acquisition Initial Margin DilutionQ2 FY26

    Fastening Systems EBITDA margin declined sequentially

    Mitigation: Integration is on track, with operating synergies expected to begin in H2 FY26 and majority in 2027; positive EPS effect expected in 2027.

    Durability of Missile Program DemandNear-term

    Missile rate increase proposals across PAC-3, FAD, Tomahawk, and classified programs are competing for space in Virginia facility

    Mitigation: Working to assess the durability of demand; no formal agreements for increased orders yet.

    What to watch in Q3 FY26

    5

    Fastening Systems Margin Recovery

    H2 FY26, majority in 2027
    Current30.1% (Q2 FY26 EBITDA margin, declined sequentially)
    TargetImprovement/stabilization

    Why it matters

    Successful integration of the CAM acquisition and realization of synergies are key to overall profitability and segment performance.

    But I think the majority of it comes in 2027, it takes a little while to turn down some prior commitments both in the supply base and also in the customer arena.

    Q&A highlights

    7

    Given the extraordinary IGT demand and Howmet's high market share, how is the company responding to capacity needs and leveraging its technology advantage?

    John Plant detailed Howmet's >50% global market share in IGT turbine blades and ongoing capacity expansions in Japan, Europe, and Virginia. He highlighted new applications and technology shifts (Equiax to DS to single crystal) expected to further increase market share. He also addressed the long-term (2040s-2050s) viability of space-based data centers as a potential threat, deeming it highly challenging.

    “Howmet has a market share in excess of 50% globally for turbine blades in the IGT market. And therefore, the growth of that market is dependent upon our willingness to invest, which we're doing.”

    asked by Sheila Kahyaoglu · answered by John Plant

    2 min read7 chapters

    Detailed Narrative

    01

    Industrial Gas Turbine (IGT) Market Dynamics and Capacity Expansion

    Howmet is experiencing extraordinary demand in the IGT market, driven by increased electricity generation needs, particularly from data centers. The company holds over 50% global market share in turbine blades and is actively investing in capacity expansion, including new plants in Japan and Europe, and expanding its Virginia facility. Management anticipates further market share gains through new applications and product introductions, with a progressive build-out of capacity expected through 2028-2030.

    02

    Commercial Aerospace Outlook and Production Rates

    Commercial aerospace demand remains strong for both new builds and spares, with higher build rates projected for 2026, 2027, and beyond. This includes anticipated increases for wide-body aircraft like the Boeing 787 (targeting rate 10) and Airbus A350 (moving to rates 8-9), as well as narrow-body platforms (737, A320). Howmet is preparing for these increases with additional capacity and recently committed to a new plant expansion for commercial aerospace.

    03

    Defense Market Strength and Missile Program Demand

    Defense aerospace continues to show solid growth, primarily from spares activity and legacy aircraft. The outlook for missile programs, including PAC-3, FAD, and Tomahawk, is strengthening, with requests for rate increases. While a significant uplift in defense spares demand from current conflicts is anticipated for 2027, it has not yet materialized in Q3/Q4 2026, and formal orders for missile program build-outs are still pending.

    04

    Strategic Capital Expenditure for Growth

    Howmet's capital expenditure is set to exceed $500 million in 2026 and will further increase in 2027. These investments are strategically directed towards supporting future organic growth in both the IGT and commercial aerospace markets. The CapEx includes significant investments in new capital equipment and expanding manufacturing footprints to meet anticipated customer demand.

    05

    CAM Acquisition Integration and Synergies

    The $1.8 billion CAM Fastener acquisition, completed in April, is progressing as planned. Initial integration efforts have focused on IT systems and employee benefit harmonization. Operating synergies are expected to begin in the second half of 2026, with the majority anticipated in 2027, including the build-out of additional distribution programs. The acquisition is expected to be EPS breakeven in 2026 and accretive in 2027.

    06

    LEAP-1B and GTF Advantage Engine Program Updates

    The cutover to the new technology blade for the LEAP-1B engine is anticipated in Q1 2027, with Howmet building inventory to ensure smooth supply. For the GTF Advantage engine, production is increasing each quarter, with full volume of legacy blades expected for the second half of 2026. A significant ramp-up for new engines and retrofit programs is projected into 2027.

    07

    Space-Based Data Centers as a Long-Term Consideration

    John Plant addressed the speculative concept of space-based data centers potentially impacting terrestrial IGT demand. He characterized this as a very long-term prospect, likely in the 2040s or 2050s, due to immense technical challenges such as launching 20,000 tons of capacity, frequent rocket launches, maintenance issues, space debris, and the sheer scale of solar arrays required.

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