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On Friday, Benchmark raised its price target for Howmet Aerospace Inc. (NYSE: HWM (BMV:HWM)) to $85.00, up from the previous target of $53.00, while reaffirming a Buy rating on the stock. The firm's analyst cited the company's typically conservative forward guidance, which reflects actual rates rather than original equipment manufacturer (OEM) projections, as a key factor in the decision.
The updated price target is based on a 21 times multiple of the forecasted fiscal year 2024 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). The analyst noted that Howmet Aerospace's guidance likely already accounts for recent production changes, given the low pull-through rates from major industry players such as GE, RTX, and Airbus.
The report also mentioned potential softness in the fastener market due to the industry's bulk buying habits, which may lead to a destocking cycle. However, the analyst believes that Howmet Aerospace's lack of defense exposure compared to companies like CRS and ATI is offset by strong aftermarket support.
Despite the 21x EV/EBITDA multiple appearing full, the analyst does not anticipate the second quarter of 2024 to disrupt the company's positive trajectory. The recommendation to stay involved with the stock was reiterated, suggesting continued confidence in Howmet Aerospace's performance.
In other recent news, Howmet Aerospace has made significant financial strides. The company announced the full redemption of its outstanding 5.125% Notes due in October 2024, with the remaining principal amount of $205,273,000 redeemed at par value, totaling an approximate payout of $208 million. This move was executed using the company's cash reserves and is part of its financial strategy and capital allocation decisions.
In the first quarter of 2024, Howmet Aerospace exceeded sales and margin expectations, prompting several financial firms to reassess their outlooks.
KeyBanc Capital Markets raised their price target from $70 to $90 and increased their earnings estimates for the second quarter of 2024 to $0.61 per share, up from $0.58, and for the full years 2024 and 2025 to $2.40 and $3.00 per share respectively. Argus also maintained its Buy rating and increased its share target to $90 from $75, citing the company's resilience amidst the supply-chain crisis and its potential for rapid earnings growth in the next few years.
BTIG initiated coverage of Howmet Aerospace, establishing a Buy rating and a price target of $95, recognizing the company's potential to benefit from the ongoing recovery in commercial aerospace and an increase in defense spending. Similarly, Baird raised its price target from $74 to $84, citing robust growth prospects in the aerospace sector.
These developments underscore the positive outlook for Howmet Aerospace in the investment community.
InvestingPro Insights
As Howmet Aerospace Inc. (NYSE: HWM) garners attention with Benchmark's revised price target, InvestingPro data and tips offer a deeper understanding of the company's financial health and market position. The market cap of Howmet Aerospace stands at a robust $32.52 billion, reflecting the company's scale and investor confidence. Strong revenue growth is evident, with a 15.47% increase in the last twelve months as of Q1 2024, and a solid gross profit margin of 28.36% in the same period. Moreover, the company has demonstrated significant price performance, with a 60.95% total return over the past year.
In the context of the article, two InvestingPro Tips are particularly relevant: Howmet Aerospace has raised its dividend for 3 consecutive years, showcasing a commitment to shareholder returns. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, indicating potential undervaluation when considering its future earnings potential. With an adjusted P/E ratio of 37.77 and a PEG ratio of 0.47 as of Q1 2024, these metrics suggest that Howmet Aerospace may offer a compelling investment opportunity.
For investors seeking a comprehensive analysis of Howmet Aerospace, InvestingPro provides additional insights. There are 15 more InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/HWM. These tips could further inform investment decisions, especially when considering the company's moderate level of debt and strong returns over various time frames. To explore the full range of insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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