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Howmet Aerospace Inc. (HWM)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: revenue $2.089B (+14% YoY), adjusted EBITDA $614M (+26% YoY) with 29.4% margin (+290 bps YoY), and diluted EPS $0.95 (+34% YoY); management said results “exceed[ed] the high end of guidance on all metrics.”
  • FY25 guidance raised on all metrics; baseline moves: revenue to $8.185B (+$55M), adj. EBITDA to $2.375B (+$55M, +50 bps margin), adj. EPS to $3.67 (+$0.07), FCF to $1.300B (+$75M). Introduced FY26 revenue guide of ~$9B (~10% YoY).
  • Cash engine intact: Q3 free cash flow $423M on $531M cash from ops; buybacks $200M in Q3 and $100M in Oct; quarterly dividend lifted 20% to $0.12. Net debt/EBITDA at 1.1x and S&P rating upgraded to BBB+.
  • Demand drivers: engine spares, defense, and industrial gas turbines (IGT) tied to data centers; commercial transportation soft (Wheels volumes -16% YoY). Near-term hiring in Engines adds some margin drag but positions for 2026 growth.

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based growth and margin expansion: revenue +14% YoY, adj. EBITDA margin 29.4% (+290 bps YoY); CEO: “results exceeding the high end of guidance on all metrics.”
    • Engines and Fasteners outperformed: Engines revenue +17% YoY; Fasteners EBITDA +35% YoY with margin +480 bps to 30.8%.
    • Strong FCF and balance sheet: Q3 FCF $423M; net leverage 1.1x; S&P upgrade to BBB+. “Free Cash Flow was $423 million after $108 million of capital expenditures.”

  • What Went Wrong

    • Commercial transportation weakness: Wheels volume -16% YoY; revenue essentially flat YoY with aluminum/tariff pass-through offsetting volume decline.
    • Higher effective tax rate vs Q2 (22.2% in Q3; Q2 benefited from discrete items), modest EPS down QoQ (to $0.95 from $1.00).
    • Labor absorption and elevated CapEx: ~265 net hires in Engines in Q3 and continued high CapEx through 2026–27 create near-term margin headwinds.

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($B)$1.835 $2.053 $2.089
Adjusted EBITDA excl. special ($M)$487 $589 $614
Adjusted EBITDA Margin excl. special (%)26.5% 28.7% 29.4%
Operating Income Margin (%)22.9% 25.4% 25.9%
Diluted EPS ($)$0.81 $1.00 $0.95

Actual vs prior Q3 guidance baseline (issued with Q2 results):

MetricQ3 2025 Guidance Baseline (as of 7/31)Q3 2025 Actual
Revenue ($B)$2.030 $2.089
Adjusted EBITDA excl. special ($M)$580 $614
Adjusted EBITDA Margin excl. special (%)28.6% 29.4%
Adjusted EPS ($)$0.90 $0.95

Segment performance

SegmentSales ($M) Q3’24Sales ($M) Q2’25Sales ($M) Q3’25Adj. EBITDA ($M) Q3’24Adj. EBITDA ($M) Q2’25Adj. EBITDA ($M) Q3’25Margin (%) Q3’24Margin (%) Q2’25Margin (%) Q3’25
Engine Products945 1,056 1,105 307 349 368 32.5% 33.0% 33.3%
Fastening Systems392 431 448 102 126 138 26.0% 29.2% 30.8%
Engineered Structures253 290 289 38 62 58 15.0% 21.4% 20.1%
Forged Wheels245 276 247 64 76 73 26.1% 27.5% 29.6%

KPIs and capital deployment

KPIQ1 2025Q2 2025Q3 2025
Cash from Operations ($M)$253 $446 $531
Capital Expenditures ($M)$119 $102 $108
Free Cash Flow ($M)$134 $344 $423
Share Repurchases ($M)$125 $175 $200 (plus $100 in Oct)
Common Dividend ($/sh)$0.10 $0.10 $0.12

Guidance Changes

MetricPeriodPrevious Guidance (Baseline)Current Guidance (Baseline)Change
Revenue ($B)FY 2025$8.130 ~$8.185 Raised (~+$0.055B)
Adjusted EBITDA ($B)FY 2025~$2.320 ~$2.375 Raised (~+$0.055B; +50 bps margin)
Adjusted EBITDA Margin (%)FY 202528.5% 29.0% Raised (+50 bps)
Adjusted EPS ($)FY 2025$3.60 $3.67 Raised (+$0.07)
Free Cash Flow ($B)FY 2025$1.225 $1.300 Raised (+$0.075B)
Revenue ($B)Q4 2025N/A$2.100 (low/high $2.090–$2.110) New
Adjusted EBITDA ($M)Q4 2025N/A$610 (low/high $605–$615) New
Adjusted EPS ($)Q4 2025N/A$0.95 (low/high $0.94–$0.96) New
Revenue ($B)FY 2026N/A$9.0 (+10% YoY) Introduced

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
Data centers/IGT demandOutlook cited “demand for industrial gas turbine fueled by significant data center expansion.” Continued strong IGT commentary tied to data centers. Detailed build-out case: utilities + on-site/data-center turbines; midsize aero-derivatives accelerating; investing in new casting/core capabilities; similar economics to aero. Strengthening; larger investment commitment
Supply chain/tariffsPlan to pass through tariff-related costs. Tariffs still fluid; pass-through expected. Net tariff impact “sub $5 million” in 2025; pass-through intact. Risks contained; pricing mechanisms working
Commercial aero spares/OEAero up 9%; strong spares. Continued strong spares and OE backlogs. Spares up 31%; OE build rates expected higher in 2026 (NB/WB assumptions). Aftermarket drives margin; OE growth in 2026
DefenseGrowth expected. +21% YoY in Q2; F-35 destock ending. +24% market growth; Engineered Structures +42% defense YoY. Robust and broadening
Wheels/commercial transportWeak volumes; pricing pass-through offset. -11% volume; margin +50 bps YoY. -16% volume; margin +350 bps YoY on cost flex, mix, FX. Volumes soft; margins resilient
Automation/AI in manufacturing——“Digital thread” and AI/ML to improve yields and content; investor/tech day planned. New execution vector for margins

Management Commentary

  • “The Howmet team drove a very strong third quarter, with results exceeding the high end of guidance on all metrics… Adjusted EBITDA Margin was solid at 29.4%… Free Cash Flow was $423 million after $108 million of capital expenditures.” – John Plant, CEO
  • “Air traffic continues to grow… backlog of commercial aircraft extends for many years… providing… OE demand and growing demand for engine spares… defense aerospace remains strong… Growing power demand to support data center builds bolsters the industrial gas turbine… market.”
  • On IGT/data centers: “Electricity demand will be… solid… we are installing additional capabilities to produce… cored turbine blades… initial turbine blades are as sophisticated as… commercial aerospace… expanding in U.S./Europe sites.”
  • Capital deployment and balance sheet: “Net leverage now stands at 1.1x… liquidity remains strong… $1B undrawn revolver; $1B CP program, unused.”

Q&A Highlights

  • IGT/data center opportunity and returns: Management emphasized sustained electricity demand from AI/data centers, investing in advanced cored blade technology across sites; economics comparable to aerospace; capacity additions into 2026–27.
  • Incremental margins drivers: Mix/content, automation, yield, price, and volume leverage offset labor absorption; expect healthy incrementals in 2026 but detailed profit guide in February.
  • 2026 aerospace build assumptions: CEO directional assumptions include higher 737/A320 rates (40s/low 60s), 787 ~7.5/mo, A350 ~6.5–7/mo; defense mid-single-digit growth on strong 2025 comp.
  • Spares sustainability: No “over-earning” in spares; expects spares to increase annually through decade; strong for CFM56, V2500, GTF, LEAP retrofits.
  • Tariffs: Net 2025 impact “sub $5 million,” with pass-throughs largely effective.

Estimates Context

  • S&P Global consensus for Q3 2025 EPS and revenue was unavailable via our connection at this time, so we benchmarked performance against the company’s prior guidance and reported actuals. We will update consensus comparisons when available.
  • Against prior Q3 baseline guidance (set on Jul 31), HWM delivered above guidance on revenue ($2.089B vs $2.030B), adj. EBITDA ($614M vs $580M), margin (29.4% vs 28.6%), and EPS ($0.95 vs $0.90).

Key Takeaways for Investors

  • Broad beat vs guidance with accelerating growth (14% YoY) and expanding margins (29.4% adj. EBITDA margin); positive setup into Q4/FY with raised FY25 outlook.
  • Engines and Fasteners remain the earnings engines; spares strength and content/mix tailwinds continue into 2026 as OE build rates rise.
  • Structural IGT upcycle tied to data center power supports multi-year growth; management deploying high-return CapEx with aero-like economics.
  • Wheels volumes weak on truck market/tariffs, but margin resilience from cost flex, premium mix, and FX limits downside.
  • FCF robust despite elevated CapEx; ample capacity for continued buybacks/dividends while funding growth; net leverage 1.1x and IG upgrades reduce funding risk.
  • Watch items: pace of OE rate increases at airframers/engines, tariff policy volatility, labor onboarding efficiency, and execution on new Michigan aero core/casting capacity.
  • Leadership transition: CFO Ken Giacobbe retiring year-end; Patrick Winterlich (ex-HXL CFO) to join Dec 1 as EVP/CFO. Continuity message remains constructive.

Additional Detail (Selected Data)

  • GAAP results: revenue $2.089B, operating income $542M (25.9% margin), net income $385M (diluted EPS $0.95).
  • Free cash flow reconciliation: CFO $531M, CapEx $108M → FCF $423M (Q3).
  • Capital returns: $200M repurchases in Q3 at $182.20/sh; $100M in Oct at $191.86/sh; dividend $0.12/sh in Q3.
  • Credit: S&P upgraded to BBB+ on Sept 8; all three major agencies rate HWM three notches IG.

All figures are from company filings and earnings materials as cited.