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
GOOGL, AMZN: Plays on inference and bundling

We see the power moving back towards the Hyperscalers, and find the combination of less risk, high growth and reasonable valuations to be compelling. AMZN: sensible upside to $305 (+20%) SOTP model an

 
 
 
RYAN / Insurance Cycle

Ryan (RYAN) is a typical hard market beneficiary, that is going through an organic growth reset. Are we there yet in terms of the reset- probably not. Timing the bottom of a cyclical market is hard. N

 
 
 
Nebius & DigitalOcean: Inference Efficiency

(NBIS, DOCN) 1. The Core AI Thesis At the core of all AI theses there are two beliefs: Demand for intelligence is ~infinite — this still seems to be true, at leas there is no data to the contrary. Com

 
 
 

Comments

bottom of page