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Howmet Aerospace Inc. (HWM)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 2025 revenue of $2.053B (+9% YoY), Adjusted EBITDA $589M (28.7% margin, +300 bps YoY), Adjusted EPS $0.91; Free cash flow $344M. Management emphasized results “exceeding the high end of guidance on all metrics” and raised FY 2025 guidance across all measures .
  • End-markets mixed: Commercial Aerospace +8% YoY; Defense Aerospace +21% with record $352M; Industrial & Other +17%; Commercial Transportation -4% with Wheels volume -11%, though segment margin held at 27.5% .
  • Capital deployment and balance sheet: $175M repurchased in Q2 and $100M in July; quarterly dividend increased 20% to $0.12; $76M term loan paydown; net debt/trailing EBITDA improved to 1.3x; liquidity strong with $546M cash, $1B undrawn revolver and $1B CP program unused .
  • Catalysts: FY 2025 baseline guidance raised—Revenue +$100M to $8.13B, Adj. EBITDA +$70M and +50 bps, Adj. EPS +$0.20, FCF +$75M—and higher 737 MAX rate assumption to 33/month supports H2 revenue trajectory; spares demand remains robust at ~20% of revenue .

What Went Well and What Went Wrong

What Went Well

  • “Exceeded the high end of guidance on all metrics” with quarterly records in revenue, Adjusted EBITDA, and Adjusted EPS; Free cash flow a second-quarter record at $344M and ninth consecutive positive quarter .
  • Engine Products delivered 13% revenue growth to $1.056B and a record 33.0% segment EBITDA margin, with strong demand in commercial/defense aero, IGT, and oil & gas; Fastening Systems margin expanded 360 bps YoY to 29.2% despite industrial/transport headwinds .
  • Management tone confident on outlook: “Commercial aerospace market should continue to grow… defense aerospace market continues to show strength… demand for industrial gas turbines fueled by significant data center expansion should remain strong,” underpinning raised FY guide .

What Went Wrong

  • Commercial transportation softness persisted: Wheels volume down 11% YoY; segment revenue -1% YoY (aluminum pass-through offset) despite strong cost flexing to maintain 27.5% margin .
  • Tariff recovery timing impacted Fastening Systems sequential drop-through; company quantified tariff drag as “significantly below $5M” in Q2 but remains a timing issue across customer reimbursements .
  • Destocking in commercial aero distribution affected Engineered Structures’ commercial aerospace sales (down 6% YoY within the segment) even as defense (F-35) recovered; wide-body builds have not increased substantially yet .

Financial Results

Consolidated Performance (GAAP and Adjusted)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.891 $1.942 $2.053
Diluted EPS ($)$0.77 $0.84 $1.00
Adjusted EPS ($)$0.74 $0.86 $0.91
Operating Income ($USD Millions)$445 $494 $521
Adjusted EBITDA excl. special items ($USD Millions)$507 $560 $589
Adjusted EBITDA Margin excl. special items (%)26.8% 28.8% 28.7%
Net Income ($USD Millions)$314 $344 $407
Cash from Operations ($USD Millions)$480 $253 $446
Free Cash Flow ($USD Millions)$378 $134 $344

Notes:

  • Q2 2025 YoY: Revenue +9%, Adj. EBITDA +22%, Adj. EPS +36% .
  • Non-GAAP reconciliation reflects discrete tax benefits in Q2 ($35M) supporting GAAP EPS vs adjusted EPS; operational tax rate 20.7% .

Segment Breakdown – Q2 2025

SegmentThird-Party Sales ($USD Millions)Segment Adjusted EBITDA ($USD Millions)EBITDA Margin (%)YoY Sales Growth (%)
Engine Products$1,056 $349 33.0% +13%
Fastening Systems$431 $126 29.2% +9%
Engineered Structures$290 $62 21.4% +5%
Forged Wheels$276 $76 27.5% -1%

KPIs and End-Market Metrics

KPIQ2 2025
Defense Aerospace Revenue ($USD Millions)$352
Spares as % of Total Revenue~20%
Commercial Aerospace Revenue Growth YoY+8%
Industrial & Other Revenue Growth YoY+17%
Commercial Transportation Revenue Growth YoY-4%
Wheels Volume Change YoY-11%
Net Debt / Trailing EBITDA (x)1.3x
Quarter-end Cash Balance ($USD Millions)$546
Common Stock Repurchases$175M in Q2; $100M in July
Dividend per Share (Q3 2025)$0.12 (+20%)

Guidance Changes

MetricPeriodPrevious Guidance (Baseline)Current Guidance (Baseline)Change
RevenueFY 2025$8.030B $8.130B Raised +$100M
Adjusted EBITDAFY 2025$2.250B $2.320B Raised +$70M
Adjusted EBITDA MarginFY 202528.0% 28.5% Raised +50 bps
Adjusted EPSFY 2025$3.40 $3.60 Raised +$0.20
Free Cash FlowFY 2025$1.150B $1.225B Raised +$75M
RevenueQ3 2025$1.990B (baseline set in Q1 guide) $2.030B Raised
Adjusted EBITDAQ3 2025$560M (baseline set in Q1 guide) $580M Raised
Adjusted EBITDA MarginQ3 202528.1% (baseline set in Q1 guide) 28.6% Raised
Adjusted EPSQ3 2025$0.86 (baseline set in Q1 guide) $0.90 Raised

Drivers:

  • Higher spares assumption and increased Boeing 737 MAX rate assumption from 28/month to 33/month support higher revenue; modest FCF benefit from U.S. tax legislation on R&D and CapEx timing included in raised FCF guide .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
OEM build ratesFY25 guide assumed Boeing 737 MAX ~25/month; Airbus A320 mid-50s; A350 ~6/month Raised 737 MAX assumption to 33/month; Airbus A320/321 ~60/month with many awaiting engines; 787 moving toward rate 7 in H2 More constructive on narrow-body rates; engine supply key gating factor
Spares demandStrong in Q4; continued in Q1 across aero and defense Spares across aero/defense/IGT up ~40% YoY; ~20% of total revenue Strength accelerating
TariffsCautious outlook; expected pass-through; uncertainty in NA impacts Tariff drag “significantly below $5M” in Q2; recovery timing impacted FS margins Improving drag; timing still a factor
Industrial Gas Turbines (IGT) and data centersPositive outlook; investing for growth IGT up ~25%; multi-year LTAs with majors; margins comparable to aero; capacity ramps in Japan/Europe through 2026–2027 Structurally strong demand; capacity build ongoing
Defense (F-35)Destocking weighed on bulkheads in 2023–24 Spares tipped to exceed OE; bulkheads now at 1:1 with Lockheed; outlook ~150 aircraft/year through decade Recovery and durable spares growth
Supply chain and destockingDestocking pressures acknowledged Continued destocking in some aero distribution; Howmet still delivered growth due to spares and defense Mixed but manageable

Management Commentary

  • “The Howmet team delivered another strong set of results in the second quarter 2025, exceeding the high end of guidance on all metrics… Adjusted EBITDA Margin* was solid at 28.7%, up 300 basis points year over year, while Free Cash Flow was a second-quarter record at $344 million” — John Plant .
  • “The commercial aerospace market should continue to grow… The defense aerospace market continues to show strength… demand for industrial gas turbines fueled by significant data center expansion should remain strong… we are increasing our full year 2025 guidance on all metrics” — John Plant .
  • Liquidity and leverage: “Net debt to trailing EBITDA continues to improve to a record low of 1.3 times. All long-term debt is unsecured and at fixed rates… liquidity remains strong with a healthy cash balance and a $1 billion undrawn revolver… $1 billion commercial paper program, both not utilized” — Ken Giacobbe .

Q&A Highlights

  • CapEx and new capacity timing/profitability: Two new plants and two extensions in Engine Products and IGT; Michigan outputs start in Q4 2025; Japan and Europe plants for large IGTs ramp through 2H26–2027; near-term margin drag from training/labor expected to subside as facilities ramp .
  • Defense/F-35: Spares now exceeding OE; bulkhead orders back to 1:1 with Lockheed; expectation of ~150 aircraft/year supports durable volumes and spares growth .
  • Tariff impacts: Net tariff drag “below $15M” for year-to-date commentary; Q2 drag “significantly below $5M,” largest in Fastening Systems; primarily timing of customer recovery .
  • Narrow-body engine availability: Airbus ~60 aircraft awaiting engines; ramp in LEAP and GTF production is critical; Safran strike resolved; inventory position on HPT/LPT improving .
  • Precision Castparts incident: Howmet orders grew from ~$25M to “much closer to $40M” with continued bidding on several hundred part numbers; incremental revenue expected over next 12 months .

Estimates Context

  • S&P Global consensus estimates were unavailable for HWM for Q2 2025, Q3 2025, and FY 2025 at time of retrieval.* In lieu of consensus comparison, note that Q2 results beat Howmet’s own guidance across revenue, EBITDA, and EPS, and management raised FY 2025 guidance on all metrics .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 print was operationally strong with records on revenue, Adjusted EBITDA, adjusted EPS, and FCF; margin expansion continues despite capacity build costs and selective destocking .
  • Guidance raise is meaningful: FY 2025 revenue to $8.13B, Adj. EBITDA to $2.32B (+50 bps margin), Adj. EPS to $3.60, FCF to $1.225B—providing both earnings and cash flow upside relative to prior baseline .
  • Demand drivers durable: spares up ~40% YoY and 20% of revenue; defense aero robust (record $352M); IGT linked to data center growth with margins comparable to aero; narrow-body OEM rates improving, contingent on engine supply .
  • Balanced capital allocation: ongoing repurchases ($175M in Q2, $100M in July), dividend raised to $0.12, debt reduced ($76M paydown), with net leverage at 1.3x—supporting optionality for sustained buybacks and growth CapEx .
  • Watch near-term headwinds: commercial transportation softness (Wheels volume -11% YoY) and tariff recovery timing can affect segment drop-through; management indicates tariff drag improving and cost flexing mitigating impact .
  • Execution risks and catalysts: capacity ramp execution through 2026–2027 (Michigan, Japan, Europe) and engine availability for Airbus narrow-bodies are pivotal; stronger H2 guided by higher 737 MAX assumptions and spares demand .
  • Trading implication: Upward guidance revisions and cash return actions are positive stock catalysts; any confirmation of improving engine deliveries and continued spares strength could drive estimate revisions and multiple support, while Wheels softness remains a known overhang .