Howmet Aerospace is the IBD Stock Of The Day for Tuesday. The defense contractor has been one of the best performers in the S&P 500 this year amid its 87% rally to record highs. Now, Howmet Aerospace shares look actionable as they bounce off key moving averages. But investors should hold off for a couple of critical factors before jumping into the stock.
Pittsburgh-based Howmet Aerospace provides engine components and metal parts for the defense, aerospace and transportation industries. Among its key customers, Howmet supplies various bulkheads for Lockheed Martin F-35 Lightning II jets, as well as the blades for RTX's Pratt & Whitney PurePower Geared Turbofan Engine. The PurePower GTF engine is used by various commercial aircraft companies including the likes of Airbus and Boeing.
The company averaged a 14% jump in sales over the first two quarters of the year, driven by growth in commercial aerospace revenue due to strong travel demand and an aging aircraft fleet. During Q2, CEO John Plant noted that the "extremely high" backlog at aircraft makers like Boeing has slowed the entire industry.
Part of that backlog stems from Boeing's quality control issues and delivery delays, which have hamstrung the Dow Jones manufacturer throughout the year. Elsewhere, Boeing and its machinist union on Monday agreed to a four-year contract and pay hike, which ends a nearly two-month strike.
Howmet Aerospace Earnings
For the third quarter, FactSet expects Howmet Aerospace to report a 29% increase in earnings to 65 cents per share. Analysts see revenue rising about 12% to $1.85 billion.
Howmet, after its Q2 beat, hiked its 2024 adjusted earnings per share guidance range to $2.53 to $2.57, up from $2.31 to $2.39. The company raised its 2024 revenue guidance to between $7.4 billion and $7.48 billion, compared to its prior outlook for $7.23 billion to $7.38 billion.
FactSet analysts expect 2024 earnings to increase 40% to $2.59 per share on 12.4% revenue growth to $7.44 billion.
Howmet Stock
Howmet Aerospace stock ranks fifth in IBD's Aerospace/Defense Group, according to IBD Stock Checkup. It is also a member of the IBD 50 list.
HWM stock bolted nearly 87% higher this year and hit a record high 106.93 on Oct. 21.
The advance has made it one of the best performers in the S&P 500, especially outside of artificial intelligence names. Including AI names, only Vistra, Nvidia, Palantir, Constellation Energy, Targa Resources and United Airlines are outpacing Howmet.
HWM stock climbed 1.4% on Tuesday. Shares have bounced off their 50-day moving average and are trading just below their 21-day exponential line.
A move above the 21-day line would make it actionable. But investors should likely wait until after earnings and the election are settled.
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