Howmet Aerospace (HWM) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 11% year-over-year to $1.84B, led by 17% growth in commercial aerospace and a 12% decline in commercial transportation.

• Net income rose 77% year-over-year to $332M ($0.81 per diluted share), with adjusted EPS up 54% to $0.71 and record free cash flow of $162M.

• Adjusted EBITDA increased 27% to $487M, margin expanded to 26.5%, and operating income rose to $421M with a 22.9% margin.

• $282M in debt reduction, $100M in share repurchases, and a 60% dividend increase to $0.08 per share in Q3; quarter-end cash balance was $475M.

• Credit ratings were upgraded by Moody’s and Fitch, and net debt-to-EBITDA improved to a record low 1.6x.

Financial highlights

• Net income (GAAP) for Q3 2024 was $332M, up from $188M in Q3 2023; operating income reached $421M, margin at 22.9%.

• Adjusted EBITDA margin reached 26.5%, up from 23.0% a year ago; adjusted EPS was $0.71, up from $0.46.

• Free cash flow for Q3 was $162M; cash balance at quarter-end was $475M.

• Interest expense declined 19% year-over-year due to debt reduction and refinancing.

• Net debt-to-EBITDA at 1.6x, with all long-term debt unsecured and at fixed rates.

Outlook and guidance

• FY 2024 revenue guidance: $7.39B–$7.43B; adjusted EBITDA: $1.885B–$1.905B; adjusted EPS: $2.65–$2.67; free cash flow: $890M–$940M.

• FY 2025 preliminary revenue growth expected at ~7.5%, led by commercial aerospace; dividend expected to increase 25% to $0.10 per share in Q1 2025.

• FY 2024 capex projected at $310M–$330M; net debt-to-EBITDA expected to improve toward ~1.5x by year-end.

• Commercial transportation demand expected to decrease in the second half of 2024; defense aerospace and IGT expected to grow at mid-single digits.

• Board approved a 2025 dividend policy targeting 15% ±5% of net income (excluding special items).