Detailed Narrative
Strategic Capital Deployment and Acquisitions
Howmet executed significant capital deployment in Q4 FY25, including $200 million in share buybacks, $50 million in dividends, $55 million for preferred share redemption, and $125 million for debt reduction. The company also made two strategic acquisitions: Brunner Inc. for its fastener business, enhancing product offerings in longer length and wider diameter parts, and agreeing to acquire an aerospace fasteners and fittings business for $1.8 billion, which will expand its presence in adjacent segments of the wider fastener market. These moves are aimed at strengthening Howmet's portfolio and driving future growth.
Robust End Market Growth
The company's key markets, including commercial aerospace, defense, and land-based gas turbines, are in a strong growth phase. Commercial aerospace is driven by increased air travel and a record OEM backlog extending into the next decade, with new aircraft builds planned to grow across manufacturers. Defense markets remain buoyant, particularly for F-35 and other legacy aircraft, with emerging demand in missiles and rocket motors. The F-35 spares demand exceeded OE demand in 2025 for the Engine Products segment.
Accelerated Gas Turbine Demand
The gas turbine business is entering its largest growth phase in years, primarily fueled by increased demand for electricity generation, especially from natural gas for data centers. Howmet expects its base gas turbine business of approximately $1 billion to double to $2 billion over the next 3 to 5 years, with further growth beyond that. The company is well-positioned as the largest manufacturer of gas turbine blades and has secured new contracts with 4 of its 7 key customers, with negotiations ongoing for the remaining 3.
Spares Business Outperformance
The combined spares revenue from commercial aerospace, defense aerospace, and gas turbines grew 33% for the full year 2025, reaching $1.7 billion. Spares now represent 21% of total revenue, up from 17% in 2024 and 11% in 2019, exceeding the company's target. This growth is driven by the expanding size and aging of the aircraft fleet, as well as durability issues in modern engines, and is expected to continue into 2026.
Record Capital Expenditures and Future Investments
Howmet reported record capital expenditures of $453 million in 2025, up approximately $130 million year-over-year, with about 70% invested in the Engines business for market expansions. The company anticipates even higher capital spending in 2026 (midpoint $470 million) and potentially in 2027, backed by customer contracts and ongoing discussions for further demand. This investment supports new manufacturing plants, extensions to existing facilities, and a recently acquired brownfield site for the gas turbine market.
Balance Sheet Strength and Shareholder Returns
The balance sheet continues to strengthen, with net debt to trailing EBITDA reaching a record low of 1x. Howmet reduced debt by $265 million in 2025 and redeemed all outstanding preferred stock for $55 million, simplifying its capital structure. The company repurchased $700 million of common stock in 2025 and an additional $150 million quarter-to-date in 2026, with $1.35 billion remaining authorization. Dividends also increased by 69% year-over-year, totaling $181 million in 2025.
Operational Efficiency and Margin Expansion
Howmet achieved a full-year EBITDA margin of 29.3%, with a Q4 exit rate of 30.1%, and an incremental flow-through of revenue to EBITDA of approximately 60% year-over-year. This was accomplished despite absorbing approximately 1,500 net new employees, predominantly in the Engine segment, which typically creates a near-term margin drag. The company continues to optimize manufacturing footprints and rationalize product mixes to maximize profitability, particularly in Engineered Structures and Forged Wheels.