top of page
Search

Howmet Aerospace (HWM)

  • Writer: Abacus Research
    Abacus Research
  • Jan 18, 2022
  • 1 min read

After spinning out Arconic in April 2020, HWM is a more focussed, higher margin business, and we believe this ‘quality’ is not fully appreciated by the market

  • We see a cyclical recovery and improving margins across all its businesses

Aerospace growth capex has been spent, leaving the industry with improving returns and strong free cash-flow generation over the next 3-5 years as volume recovers.

  • HWM trades at ~5% 2023 FCF yield, 13x 2022 EV/EBITDA and ~24x PE on 2022 street estimates, yet it will grow earnings ~30% annually from 2021-23.

  • High incremental margins: Aggressive cost cutting appears structural in nature.

  • Incremental margins for next couple of years of ~35% on incremental volume vs. current 20%.

  • Strong cyclical recovery in commercial planes deliveries in 2022 and 2023 and Trucks benefiting from easing supply chain issues in H2 2022 and 2023.

  • Capital allocation to buybacks and M&A could also help earnings.

Potential Upside: $46 (+31%)

Sensible Downside: $30 (-14%)


 
 
 

Recent Posts

See All
Brookfield (BN):

We initially wrote up BN in Jan 2024, it has increased 70%, so why mention it again? Firstly, we think the fundamentals are as good now as they were 2 yrs ago, with a >15% IRR on offer. BN is not a we

 
 
 
Figure (FIGR)

We believe Figure is highly disruptive. If tokenisation of real-world assets is a theme for the next decade, FIGR could be at the centre of it. Figure has found a real-world use for blockchain, provin

 
 
 

Comments

bottom of page