Howmet Aerospace Inc. HWM is scheduled to release first-quarter 2025 results on May 1, before market open. The Zacks Consensus Estimate for earnings is currently pegged at 77 cents per share on revenues of $1.93 billion. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

First-quarter earnings estimates have been stable over the past 60 days. The bottom-line projection indicates an increase of 35.1% from the year-ago number. The Zacks Consensus Estimate for quarterly revenues indicates year-over-year growth of 6%.

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Earnings Surprise History

Howmet has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.3%. In the last reported quarter, it delivered an earnings surprise of 2.8%.

Earnings Whispers for HWM

Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.

HWM has an Earnings ESP of +0.20% and a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

What’s Likely to Shape Howmet’s Q1 Results?

Howmet has been witnessing weakness in the commercial transportation market. Lower demand in the commercial transportation markets served by the Forged Wheels segment due to lower OEM builds is likely to have dragged its performance in the first quarter. Production issues at The Boeing Company BA due to quality control challenges are also expected to have affected narrow-body and wide-body production rates, which is likely to have affected its sales.

The company is dependent on a global supply chain, and in recent years, it has experienced supply-chain disruptions in the aerospace sector that resulted in delays and increased costs. Although moderated, persistence of supply-chain issues in the aerospace sector is likely to have affected its operations and performance.

Over time, HWM’s performance has been adversely impacted by high costs and expenses. Labor shortage and an increase in raw material costs amid tariff-related issues are expected to have hurt the company’s bottom line in the to-be-reported quarter. Also, given its extensive geographic presence, foreign exchange headwinds are expected to have hurt Howmet’s overseas business.

However, Howmet is witnessing solid momentum in the commercial aerospace market. The strength in air travel has been driving demand for wide-body aircraft, thereby supporting continued OEM spending. Pickup in air travel is generally positive for the company because the increased usage of aircraft spurs spending on parts and products that it provides. Notably, a gradual production recovery of the Boeing 737 MAX aircraft is likely to have proven favorable for the demand for HWM’s products in the market.

The company is also benefiting from the positive momentum of the defense business, cushioned by steady government support. HWM has been experiencing robust orders for engine spares for the F-35 program and other legacy fighters. This is likely to have augmented its top-line performance in the quarter.

HWM’s Price Performance

HWM shares have gained 9.4% in the past three months against the Zacks Aerospace - Defense industry’s 4.3% decline. The company’s shares have fared comparatively better than the S&P 500’s decline of 10.9%. While its peers, Boeing Company and GE Aerospace GE have gained 0.7% and 1.6%, respectively, RTX Corporation RTX lost 2.5% in the same period.

Three-Month Price Performance

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Howmet’s Valuation Remains an Overhang

HWM is trading at a forward 12-month price-to-earnings (P/E) ratio of 38.62X, higher than the industry average of 23.42X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. In comparison with HWM’s valuation, its peers GE Aerospace and RTX Corp. are trading cheaper. Notably, GE Aerospace and RTX Corp. are currently trading at 33.88X and 19.22X, respectively.

Price-to-Earnings (Forward 12 Months)

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How Should You Play Howmet Pre-Q1 Earnings?

Howmet's robust and diversified portfolio, along with its strength in the commercial aerospace market, seems promising for its long-term growth.

However, weakness in the commercial transportation market, along with supply-chain issues, has been concerning for its near-term performance. Also, high operating costs and expenses and expensive valuation warrant a cautious approach for existing investors. Potential investors should consider waiting for HWM’s earnings report and clearer signs of recovery before investing in the stock.

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This article originally published on Zacks Investment Research (zacks.com).

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