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    HWM
    Earnings call· Sep 2025(Q3 FY25)

    Howmet Aerospace Inc. HWM

    Oct 30, 2025 Source

    Executive summary

    Howmet Aerospace Q3 FY25 — Record Revenue, EBITDA, and EPS Driven by Commercial Aerospace and IGT Demand

    Howmet Aerospace delivered a robust third quarter, driven by accelerating demand in Commercial Aerospace and Industrial Gas Turbines (IGT), particularly from data center build-outs. The company is strategically investing in capacity expansion, especially for its Engines business, to capitalize on these growth opportunities while maintaining strong free cash flow generation and improving its balance sheet. Management expects continued strong performance into 2026, with a focus on technology and automation to enhance future profitability.

    Highlights

    5

    • Revenue increased 14% year-over-year, reaching $2.09 billion.

    • EBITDA grew 26% to $600 million, with EBITDA margin expanding 290 basis points to 29.4%.

    • Adjusted EPS rose 34% to $0.95.

    • Free cash flow was strong at $423 million in the quarter, with full-year guidance raised to $1.3 billion.

    • Net debt-to-EBITDA improved to a record low of 1.1x, and S&P upgraded the credit rating to BBB+.

    Concerns

    3

    • Commercial Transportation revenue was down 3% in Q3, with wheels volume down 16%.

    • The company anticipates continued labor ingestion drag on margins due to ongoing hiring for growth initiatives.

    • Tariff changes continue to produce uncertainty, though the net drag remains small at approximately $5 million.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2025 Revenue
    $8.15 billion +/- $10 million
    high materiality
    High
    Full-year 2025 EBITDA
    $2.375 billion +/- $5 million
    high materiality
    High
    Full-year 2025 Earnings Per Share
    $3.67 +/- $0.01
    high materiality
    High
    Full-year 2025 Free Cash Flow
    $1.3 billion +/- $25 million
    high materiality
    High
    Q4 2025 Revenue
    $2.1 billion +/- $10 million
    medium materiality
    High
    Q4 2025 EBITDA
    $610 million +/- $5 million
    medium materiality
    High
    Q4 2025 Earnings Per Share
    $0.95 +/- $0.01
    medium materiality
    High
    Full-year 2026 Revenue
    $9 billion plus or minus
    high materiality
    Medium
    Full-year 2026 Commercial Aerospace Revenue Growth
    a few percentage points higher than 2025
    medium materiality
    Medium
    Full-year 2026 Defense Revenue Growth
    mid-single digits increase
    medium materiality
    Medium
    Full-year 2026 Industrial Segment Revenue Growth (Gas Turbine, Oil & Gas, General Industrial)
    getting into double digits
    medium materiality
    Medium
    Free Cash Flow Conversion
    90% of net income
    high materiality
    High
    Capital Expenditure
    high levels
    medium materiality
    High
    Aerospace Spares Business Growth
    increasing every year
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Engines
    Delivered record revenue, EBITDA, and EBITDA margin. Strong demand across all markets, particularly engine spares. Absorbed costs from headcount additions.
    EBITDA: $368 millionEBITDA growth: 20%Commercial Aerospace revenue growth: 13%Defense Aerospace revenue growth: 23%Oil and Gas revenue growth: 33%IGT revenue growth: 23%Net new employees: 265 in Q3Year-to-date incremental headcount: 1,125
    		$1.1 billion17%—33.3% EBITDA margin
    Fastening Systems
    Achieved record revenue, EBITDA, and EBITDA margin. Margin expansion driven by commercial and operational performance, despite sluggish wide-body recovery and commercial transportation weakness.
    EBITDA: $138 millionEBITDA growth: 35%Commercial Aerospace revenue growth: 27%Defense Aerospace revenue growth: 2%General Industrial revenue growth: 3%Commercial Transportation revenue decline: 17%
    		$448 million14%—30.8% EBITDA margin
    Engineered Structures
    Solid quarter with strong EBITDA growth. Defense Aerospace growth primarily driven by the end of F-35 destocking. Margin improvement from optimizing manufacturing footprint and rationalizing product mix.
    EBITDA: $58 millionEBITDA growth: 53%Commercial Aero revenue growth: 7%Defense Aerospace revenue growth: 42%
    		$289 million14%—20.1% EBITDA margin
    Forged Wheels
    Revenue flat despite a 16% decrease in volume, offset by higher aluminum costs, tariff pass-through, and favorable foreign currency. Margin expanded due to flexing costs, favorable premium product mix, and foreign currency.
    EBITDA: $73 millionEBITDA growth: 14%Volume decrease: 16%
    		essentially flat——29.6% EBITDA margin

    Operational metrics

    31
    Adjusted EBITDA
    $600 millionup 26%
    Q3 FY25

    Record EBITDA, outpacing revenue growth.

    Adjusted Operating Income
    up 29%
    Q3 FY25

    Growth in operating income.

    Adjusted EPS
    $0.95up 34%
    Q3 FY25

    Record EPS.

    Capital Expenditure
    $108 million
    Q3 FY25

    Acceleration of capital expenditures.

    Net Debt to EBITDA
    1.1x
    Q3 FY25

    Record low net leverage.

    S&P Credit Rating
    BBB+upgrade from BBB
    Q3 FY25

    Reflects improved financial leverage and strong cash generation.

    Cash Balance
    $660 million
    Q3 FY25

    Healthy cash balance at quarter-end.

    Undrawn Revolver Capacity
    $1 billion
    Q3 FY25

    Strong liquidity, not utilized.

    Commercial Paper Program
    $1 billion
    Q3 FY25

    Complements liquidity, not utilized.

    Capital Deployment
    $770 million
    YTD Q3 FY25

    Total cash deployed year-to-date through September.

    Common Stock Repurchases
    $200 million
    Q3 FY25

    Repurchases in the quarter.

    Common Stock Repurchases
    $100 million
    October 2025

    Additional buyback in October.

    Common Stock Repurchases
    $600 million$100 million higher than 2024 full year
    YTD October 2025

    Year-to-date repurchases through October.

    Remaining Share Repurchase Authorization
    $1.6 billion
    as of end of October 2025

    Authorization from the Board of Directors.

    Dividend Per Share
    $0.12up 20% vs prior quarter, up 50% vs Q3 FY24
    Q3 FY25

    Increased quarterly dividend.

    Debt Reduction
    $140 million
    YTD Q3 FY25

    Debt reduced year-to-date, including early prepayment of term loan.

    Annualized Interest Expense Reduction
    $8 million
    Annual

    Resulting from early debt prepayment.

    Commercial Aerospace Revenue Growth
    15%
    Q3 FY25

    Overall commercial aerospace growth.

    Commercial Aero Part Sales Growth
    38%
    Q3 FY25

    Within commercial aerospace.

    Total Spares Sales Growth
    31%
    Q3 FY25

    Total spares growth across Commercial Aero, Defense Aero, IGT, and Oil & Gas.

    Defense Aerospace Revenue Growth
    24%
    Q3 FY25

    Robust growth driven by engine spares and F-35 builds.

    Defense Engine Spares Growth
    33%
    Q3 FY25

    Within Defense Aerospace.

    Industrial and Other Markets Revenue Growth
    18%
    Q3 FY25

    Healthy growth driven by oil and gas and IGT.

    Oil and Gas Revenue Growth
    33%
    Q3 FY25

    Within Industrial and Other markets.

    IGT Revenue Growth
    23%
    Q3 FY25

    Within Industrial and Other markets.

    Working Capital Days
    improvedyear-over-year
    Q3 FY25

    Allowed for increased capital expenditure within free cash flow.

    Headcount Increase
    265 people
    Q3 FY25

    Mainly within engines business to staff new manufacturing plants.

    Average Diluted Share Count
    405 million shares
    Q3 FY25 exit rate

    Improved due to share repurchases.

    Commercial Transportation Revenue Decline
    3%
    Q3 FY25

    Challenging market.

    Wheels Volume Decline
    16%
    Q3 FY25

    Within commercial transportation.

    Tariff Net Drag
    $5 million
    Annual

    Net tariff drag, discussed in previous earnings call, remains small.

    Industry KPIs

    5
    MetricValueDetails
    Total company backlogrecord backlog
    Defense program awards—
    Aftermarket services split31%%
    Production rates by program—aircraft/month
    Production capacity expansion—

    Orderbook & backlog

    1
    New, more fuel-efficient aircraftrecord backlogQ3 FY25

    Extends for many years, even after assuming increases in build rates throughout the next 5 years.

    Capital programs

    1
    Michigan Aero Engine core and casting planton track

    Benefit: new capabilities and casting machines

    Most vital immediate part of expansion, machines now building some parts, more equipment to be installed in next 6 months.

    Risks & headwinds

    3
    Commercial Transportation Market WeaknessQ3 FY25, ongoing

    Revenue down 3% in Q3, wheels volume down 16%

    Mitigation: Offset by flexing of costs, favorable product mix, and favorable foreign currency in Forged Wheels segment.

    Tariff Uncertainty and DragFY25

    Net tariff drag of approximately $5 million

    Mitigation: Company is solid in pass-through capabilities under existing contracts or new agreements; net effect is small.

    Labor Ingestion and Headcount AdditionsNear-term, ongoing into 2026/2027

    265 net headcount additions in Q3, 1,125 YTD in Engines

    Mitigation: Positions for future growth, but creates a near-term margin drag and slight degradation in yield from new employees.

    What to watch in Q4 FY25

    5

    FY26 Revenue Guidance Refinement

    February 2026 earnings call
    Current$9 billion plus or minus
    TargetMore detailed guidance

    Why it matters

    This will provide a more precise outlook for the company's top-line growth, which is a key driver of investment thesis.

    This number will be further refined in our February 2026 earnings call, where we will also provide more detailed guidance.

    Q&A highlights

    7

    Can you elaborate on the competitive landscape, technology differentiation, pricing, and expected returns in the IGT sector, especially compared to aerospace, given the data center build-out?

    John Plant explained that data center demand is driving extraordinary electricity needs, which utilities struggle to meet, leading to increased demand for gas turbines. Howmet's technology in IGT is evolving similarly to aerospace, with a focus on cored turbine blades for higher temperatures, increasing content and value. He noted that the economics and incrementals for IGT are similar to aerospace, and the company is expanding capacity in Michigan, Europe, and the U.S. to meet this demand.

    “It's a pretty exciting landscape in terms of playing to our strength of the more sophisticated technology. It's causing us to expand.”

    asked by Kristine Liwag · answered by John Plant

    2 min read6 chapters

    Detailed Narrative

    01

    Data Center Demand and IGT Market Evolution

    The extraordinary demand for electricity from data center build-outs, driven by AI and storage needs, is creating significant growth in the Industrial Gas Turbine (IGT) market. This demand is met by large land-based turbines for utilities, gas turbines installed at data center sites, and fast-reacting midsized aero-derivative turbines for uninterrupted supply. Howmet sees this as an exciting landscape, playing to its strength in sophisticated technology, similar to its aerospace business.

    02

    Technology Differentiation and Investment in IGT

    Howmet's technology in IGT is evolving similarly to aerospace, moving from solid turbine blades to increasingly cored blades with air pathways for cooling, allowing higher operating temperatures. This sophistication drives higher content and value. The company is investing in additional capabilities to produce fine tolerance cores, expanding its manufacturing plants in Michigan, Europe, and existing U.S. facilities to meet this demand, with investments backed by customer contracts.

    03

    2026 End Market Growth Outlook

    For 2026, Commercial Aerospace is expected to be stronger, with higher build rates for narrowbodies (Boeing 737 into the 40s, A320 into the early 60s) and widebodies (787 at 7.5, A350 at 6.5-7). Defense is projected to see mid-single-digit growth on top of a strong 2025. The combined industrial segment (Gas Turbine, Oil & Gas, General Industrial) is anticipated to achieve double-digit growth, with IGT at the high end.

    04

    Commercial Aero Destocking and Spares Trends

    Destocking in Commercial Aerospace is largely complete, with minimal remaining inventory, possibly only in titanium. Engine spares demand is expected to be very strong in 2026, particularly for CFM56 due to existing fleet utilization, and even higher for LEAP-1A/1B and GTF engines. The transition to new engine versions will drive both OE demand and retrofit requirements to improve engine robustness and return them to service.

    05

    Capital Expenditure Strategy and Returns

    Howmet anticipates CapEx to remain at high levels in 2026 and 2027, with the majority of absolute dollars still allocated to aerospace, but a higher relative percentage for IGT. The economics for IGT investments are comparable to aerospace, both offering very good returns. The company's strategy is to deploy capital for growth, backed by customer commitments and high hurdle rates, while maintaining its aim to convert 90% of net income into free cash flow.

    06

    Operational Efficiency and Digital Transformation

    The company continues to benefit from a combination of volume leverage, automation, yield improvements, and content. It is investing in advanced manufacturing techniques, including artificial intelligence and machine learning, to analyze vast amounts of data from its 'digital thread' throughout the manufacturing process. This is expected to further improve yields, enhance design tolerances, and drive content improvement and fuel efficiency for both aerospace and gas turbine segments.

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