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Howmet Aerospace Inc. (HWM)·Q1 2025 Earnings Summary

Executive Summary

  • Record Q1 2025 revenue of $1.94B (+6% YoY), adjusted EBITDA margin rose to 28.8% (+480 bps YoY), and adjusted EPS reached $0.86 (+51% YoY), exceeding all aspects of baseline guidance .
  • Fastening Systems and Engineered Structures delivered notable margin progression; Wheels faced market softness but held a 27% EBITDA margin .
  • FY 2025 guidance raised: baseline adj. EBITDA to $2.25B (+$120M), adj. EPS to $3.40 (+$0.23), FCF to $1.15B (+$75M); revenue range widened to $7.88B–$8.18B (baseline $8.03B unchanged) .
  • Near-term catalysts: spares hit 20% of total revenue (a year ahead of plan), Boeing 737 MAX rate assumption increased, and Fitch upgraded HWM to BBB+; tariffs expected to have <$15M net impact in 2025 with pass-through, causing temporary Q2 margin drag .

What Went Well and What Went Wrong

What Went Well

  • “Solid start to 2025, setting quarterly records in revenue, Adjusted EBITDA*, Adjusted EBITDA margin*, and Adjusted EPS* while exceeding all aspects of our baseline guidance” — John Plant .
  • Fastening Systems and Engineered Structures posted standout margin gains (FS to 30.8%, ES to 21.3%) on productivity and mix optimization .
  • Spares momentum: reached ~20% of total revenue, up ~33% across Commercial Aero, Defense, IGT, and O&G; balances growth narrative and supports margin quality .

What Went Wrong

  • Commercial Transportation softness: Wheels revenue down 13% YoY; segment EBITDA -17% YoY (margin held 27.0%) .
  • Wide-body ramp delay and supply-chain constraints (787 and A350 component issues), moderating near-term trajectory despite strong backlogs .
  • LEAP LPT destocking and inventory digestion at Boeing dampened sequential Commercial Aero growth; normalization expected as production rises through H2 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.835 $1.891 $1.942
GAAP Diluted EPS ($)$0.81 $0.77 $0.84
Adjusted EPS ($)$0.71 $0.74 $0.86
Operating Income ($USD Millions)$421 $445 $494
Operating Margin (%)22.9% 23.5% 25.4%
Adjusted EBITDA ($USD Millions)$487 $507 $560
Adjusted EBITDA Margin (%)26.5% 26.8% 28.8%
Free Cash Flow ($USD Millions)$162 $378 $134

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentThird-party Sales ($USD Millions) Q1’24Third-party Sales ($USD Millions) Q1’25Segment Adjusted EBITDA ($USD Millions) Q1’24Segment Adjusted EBITDA ($USD Millions) Q1’25Segment Adjusted EBITDA Margin Q1’24Segment Adjusted EBITDA Margin Q1’25
Engine Products$885 $996 $249 $325 28.1% 32.6%
Fastening Systems$389 $412 $92 $127 23.7% 30.8%
Engineered Structures$262 $282 $37 $60 14.1% 21.3%
Forged Wheels$288 $252 $82 $68 28.5% 27.0%

KPIs and Balance Sheet Highlights (Q1 2025)

KPIQ1 2025
Cash Balance ($USD Millions)$537
Net Debt / Trailing EBITDA1.4x
Free Cash Flow ($USD Millions)$134
Spares as % of Total Revenue~20%
Common Dividend per Share$0.10 (paid Feb 25, 2025; next payable May 27, 2025)
Share Repurchases$125M in Q1 at $124.24 avg; $100M in April at $125.61 avg
Effective Tax Rate / Operational Tax Rate22.9% / 20.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Low $7.930B / Baseline $8.030B / High $8.130B Low $7.880B / Baseline $8.030B / High $8.180B Range widened (±$100M → ±$150M); baseline maintained
Adjusted EBITDAFY 2025$2.130B baseline $2.250B baseline Raised +$120M
Adjusted EPSFY 2025$3.17 baseline $3.40 baseline Raised +$0.23
Free Cash FlowFY 2025$1.075B baseline $1.150B baseline Raised +$75M
RevenueQ2 2025N/ALow $1.980B / Baseline $1.990B / High $2.000B New
Adjusted EBITDAQ2 2025N/A$555M / $560M / $565M New
Adjusted EPSQ2 2025N/A$0.85 / $0.86 / $0.87 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/data centers → IGT demandEngines spares strong; cautious outlook; prep for 2025 growth Growing optimism: building capacity; IGT margins similar to aero; multi-year expansions Demand intact; capacity additions in Japan/Europe; multi-year customer-backed expansions Strengthening, multi-year investment cycle
Supply chain (wide-body)Boeing strike impact; looking to recovery Supply-chain normalization needed; cautious guidance 787 ramp delayed; A350 fuselage constraints; inventory digestion at Boeing Incremental headwinds near term
Tariffs/macroNot a focusExpected pass-through; manageable Force majeure notices; net 2025 impact <~$15M; ~Q2 margin drag; broad pass-through secured Manageable headwind with temporary drag
Product performance (margins)FS and ES improving ES to high-teens margin; FS ~28% exit; Engines stable FS to 30.8%, ES to 21.3%, Engines to 32.6% Broad-based margin expansion
Regional trendsRobust aero demand, spares growth Asia Pac travel growth; defense strength Europe/APAC traffic growth; NA moderation; defense robust Mixed traffic; defense steady

Management Commentary

  • “Margin progression within the Fastening Systems and Engineered Structures segments was particularly noteworthy. Free cash flow was healthy at $134 million… and marked the eighth consecutive quarter of positive free cash flow generation.” — John Plant .
  • “End markets continue to be healthy… EBITDA, EBITDA margin and EPS were all records and exceeded the high end of guidance… Net debt to trailing EBITDA remains at a record low of 1.4x.” — Ken Giacobbe .
  • “Net tariff costs… expected to be passed on to customers… net impact less than $15 million in 2025… Q2 margin lower than Q1 essentially because of tariff drag.” — John Plant .
  • “We are building capacity in Japan and Europe [IGT]… expansions backed by solid customer agreements for many years.” — John Plant .

Q&A Highlights

  • Tariffs: Gross impact worst case $80M; net 2025 impact <$15M after mitigation and pass-through; two units primarily affected; >90% of revenue covered by agreements in one unit; ~50% covered via distribution in another; temporary Q2 margin drag .
  • Narrow-body rates: 737 MAX assumption raised to 28/month (from 25), implying H2 production pickup; inventory digestion at Boeing tempered Q1 sequential growth; A320 mid-50s assumptions maintained .
  • Engine blades and certification: LEAP‑1A cutover complete; LEAP‑1B certification targeted by end of 2025; GTF Advantage changeover targeted mid-2025, adds content and durability .
  • Spares mix: ~20% of total revenue; Commercial Aero/Defense spares grew >40%, IGT/O&G ~15%; drives margin quality .
  • Segment margins sustainability: ES improvements from process control, scrap reduction, footprint optimization and mix; FS contracts and productivity gains; management targets high-teens ES margins sustained in 2025 .

Estimates Context

  • S&P Global Wall Street consensus for Q1 2025 EPS and revenue was unavailable at the time of this analysis.
  • Relative to company guidance for Q1 issued on Feb 13, 2025 (Revenue $1.935B, adj. EBITDA $520M, EPS $0.76), actuals were stronger: Revenue $1.942B, adj. EBITDA $560M, EPS $0.84 GAAP / $0.86 adjusted, representing an across-the-board beat versus internal guidance .
  • Given raised FY guidance and strong Q1 margins, sell-side models may need to lift FY adj. EBITDA, adj. EPS, and FCF assumptions and incorporate tariff pass-through timing and Q2 drag as indicated by management .

Key Takeaways for Investors

  • Strong quarter with quality: broad margin expansion (adj. EBITDA margin 28.8%) and robust spares mix (~20% of revenue) should support sustained earnings power even amid wide-body and tariff noise .
  • Guidance risk skewed positive: FY adj. EBITDA/EPS/FCF raised; revenue range widened for uncertainty, but Boeing rate assumption increased and defense/IGT strength underpin outlook .
  • Temporary Q2 margin headwind from tariffs likely fades by H2 as pass-throughs normalize; 2025 net impact guided <~$15M .
  • Segment leadership: Engines at 32.6% margin, FS at 30.8%, ES at 21.3% — operational improvements and mix should continue to compound as build rates rise .
  • Capital returns and balance sheet optionality: $225M buybacks (Q1+April), dividend doubled YoY to $0.10, net leverage ~1.4x, Fitch to BBB+; management targeting stronger “fortress” balance sheet by year-end .
  • Watch list: Boeing inventory digestion and timing of 737 MAX/787 recovery; LEAP‑1B certification; GTF Advantage cutover; tariff trajectories; Wheels volumes in H2 .