Howmet Aerospace (HWM): the part nobody replaces

2026-09-22 · By Lubin Danilo, founder of Lubin Investment

HWM: see the full analysis on Lubin Investment

Howmet Aerospace forges and machines the precision parts that go inside nearly every new jet engine. My model passes 9 of my 10 quality criteria, powered by free cash flow that has grown more than fivefold since 2020. The one weak spot: a valuation my model judges roughly 11% too high today.

What does Howmet Aerospace actually make?

Howmet Aerospace was born on April 1, 2020, the day the old Arconic group split into two companies: Arconic Corporation (aluminum rolling) and Howmet Aerospace (engineered products and forging). The timing was almost cruel: global commercial aviation had just ground to a halt because of Covid, and the new company began trading in the middle of a crisis hitting the exact industry it serves. Its revenue kept falling in 2021 before turning around.

Howmet does not build airplanes or complete engines. It forges and machines the parts that go INSIDE a jet engine or an industrial gas turbine: turbine blades (the small vanes that spin at extreme temperatures to extract energy from combustion gases), disks, structural rings, and, more recently, fasteners (bolts, rivets, and specialized fittings) that hold the airframe together. It also makes forged wheels for trucks and military vehicles, a smaller fourth segment. In December 2025, Howmet announced a $1.8 billion acquisition of Stanley Black & Decker's aerospace fastener business (Consolidated Aerospace Manufacturing), a deal that made it the world's largest aerospace fastener maker.

Why can't anyone simply copy its advantage?

What protects Howmet is not a patent or a brand, it is qualification time. A part spinning inside a jet engine, sometimes at temperatures above the theoretical melting point of the alloy itself (thanks to internal cooling channels), cannot tolerate the smallest manufacturing flaw: a failure in flight is catastrophic. Getting a new supplier certified for even one of these parts by the FAA or EASA, then by the engine maker itself, takes years, not months. And a commercial jet stays in production for twenty to thirty years: once a supplier is qualified on a program, it effectively stays there for that program's entire life.

Howmet supplies over 90% of the structural and rotating parts for the two best-selling engine families on narrowbody jets today: the CFM LEAP (which powers the Airbus A320neo and Boeing 737 MAX) and the Pratt & Whitney GTF. Its proprietary single-crystal and directionally-solidified casting technology (processes that align the metal grain structure of a turbine blade in a single direction, instead of the disordered grains of ordinary metal that crack faster under heat and centrifugal force) remains hard to match. Competitors exist in fasteners, such as LISI Aerospace or Doncasters, but none matches Howmet's scale or qualification history on the engines themselves.

What does my quality checklist confirm about this business?

On my site, I judge a company's quality separately from its price, against ten concrete financial criteria. Howmet passes nine of them, rechecked live the day I am writing this. Net margin comes in at 20.5%, an industrial company keeping a fifth of every sales dollar as net profit. Revenue grows 13.7% a year on average over five years, share count shrinks 1.3% a year (Howmet buys back its own stock rather than issuing more), and cash return on invested capital (Cash ROCE, the cash generated relative to the capital actually tied up in the business) reaches 46%, a very high level saying every dollar reinvested in a new forging press earns back far more than it costs.

Two nuances deserve an explanation rather than just a mention. Revenue per employee only grows 7.1% a year, a 'warn' signal in my model rather than an outright fail: it is the classic lag of a company hiring and training staff for new forging capacity before that capacity ramps to full output and starts generating revenue. The cash conversion cycle (the number of days the company's cash stays tied up in inventory and receivables before being collected) runs around 79 days, longer than average, consistent with an industrial business that has to stockpile months of raw materials and in-progress parts before final delivery. The only criterion that fails outright, with no nuance attached: price.

How has cash generation evolved since the worst of 2020?

Howmet's real story is in the trajectory, not a single number. Free cash flow (the cash genuinely left over once bills and investments are paid) went from -$258 million in 2020 (the Covid year, when the company was burning cash) to $250 million in 2021, $540 million in 2022, $682 million in 2023, $977 million in 2024, and $1.43 billion in 2025. This is not a simple post-Covid rebound: the pace of improvement is accelerating each year rather than slowing as it approaches a ceiling.

Howmet's second-quarter 2026 press release confirms that acceleration is continuing: revenue of $2.55 billion for the quarter alone, up 24% year over year (21% organic), driven by commercial aerospace (53% of revenue, +28%) and industrial gas turbines (13% of revenue, +38%, demand partly tied to new data centers that need readily available electricity). Adjusted EBITDA margin expanded 340 basis points to 32.1%, quarterly free cash flow hit $479 million, and the company raised full-year 2026 guidance to $10.05 billion in revenue and $1.9 billion in free cash flow, while buying back $800 million of its own stock since January and raising its dividend by 17%.

Why does the stock trade at 54.8 times its annual cash flow?

P/FCF (price-to-free-cash-flow: the share price divided by the cash generated each year; a P/FCF of 54.8 means you are paying today for nearly 55 years of that cash at the current run rate) is high, even for a company of this quality. What the market is paying for is not just the one-time sale of a new part: it is the stream of high-margin spare parts that follows for the twenty to thirty years of an engine's service life. A jet engine consumes maintenance parts at high margin throughout its career, a business model close to razors and blades, except here the blade can legally only come from a qualified supplier. As the global fleet of LEAP- and GTF-powered aircraft ages, that spare-parts stream grows mechanically, with no extra sales effort required.

A small coincidence I noticed while preparing this piece: the five-year compound growth rate of free cash flow per share (54.8% a year) and the multiple the stock trades at (54.8 times that same cash flow) land on almost the exact same number. It is nothing more than today's arithmetic coincidence, not a signal, but it captures the actual bet this stock represents: the market is wagering that this growth pace keeps up for a long while. Per Aswath Damodaran's valuation framework, a high multiple is only justified if the growth behind it is durable, not just fast over the last two or three years. That is exactly the bet you make buying Howmet at this price: that the current commercial aviation supercycle (Boeing and Airbus backlogs measured in years) keeps running at full speed.

Is the current price justified, according to my model?

My model calculates a reasonable buy price of $205.43 for Howmet. Against a current share price of $227.37, the stock trades about 11% above that level. This is not an alarm bell: it is a very high-quality business that I judge to simply be running a bit ahead of itself right now, not a bad deal to run from.

The balance sheet does not weigh against it. Per the latest quarterly filing with the SEC, Howmet's total financial debt stands at roughly $3.05 billion against $742 million in cash, a net debt of about $2.3 billion, payable in a little over two years of current free cash flow. That is a healthy balance sheet, giving the company plenty of room to keep buying back stock and funding the aerospace fastener acquisition without needing to borrow heavily. Quality justifies part of the premium the market pays; the remaining 11% gap is exactly the kind of margin I would rather see close, either through a pause in the share price or another quarter or two at the current pace, before calling this price genuinely attractive.

What's the real risk I'm watching for this thesis?

Titanium is the first concrete risk. Despite Howmet's own investments and those of other Western manufacturers in new melting furnaces and recycling capacity to cut dependence, Russia's VSMPO-AVISMA is still estimated to supply roughly 25% to 30% of the titanium used in Western aerospace manufacturing. Calls for tougher sanctions on Russian titanium multiplied in 2025, and real tightening before Western diversification is fully online could push up raw material prices or create a temporary shortage, even for a supplier as well positioned as Howmet.

The second risk is cyclicality itself. The 2020 air pocket, when free cash flow fell to -$258 million, proves this business is not immune to an aviation demand shock: a strike at Boeing or Airbus, a new safety incident that grounds an entire fleet, or simply a global economic slowdown that cuts air traffic, feeds directly into the volume of new parts ordered by aircraft makers, even though the spare-parts stream on the existing fleet stays comparatively resilient. This is a defensive industry over the long run, not one immune to a rough quarter.

So what do I do with it?

Howmet's quality is not much in doubt for me: a near-monopoly position protected by years of regulatory qualification, cash flow accelerating for five consecutive years rather than just a post-Covid bounce, a healthy balance sheet, and an industry riding a genuine industrial supercycle rather than a passing trend. My discipline, quality AND price, never one without the other, keeps me from paying an 11% premium above my own estimate for now. Find all these numbers recalculated live on the full Howmet Aerospace data page, the detail of my method on the methodology page, and the rest of the sector on my aerospace and defense hub. A comparable tension, between an exceptional order backlog and cash flow that still needs to confirm it, also shows up in my Rheinmetall analysis, another industrial name riding a historic demand cycle.

Howmet passes 9 of my 10 quality criteria: 20.5% net margin, 13.7% annual sales growth, 46% cash return on invested capital, net debt payable in a little over two years of cash.
It supplies over 90% of the structural and rotating parts for CFM LEAP and Pratt & Whitney GTF engines, a near-monopoly protected by years of regulatory qualification, not by a patent.
Free cash flow has grown more than fivefold since 2020 (-$258 million to $1.43 billion in 2025), and Q2 2026 confirms the acceleration with revenue up 24%.
The one weak spot in my model: a valuation of 54.8 times annual cash flow, about 11% above my reasonable buy price of $205.43 against a share price of $227.37.
The main risk to watch: roughly 25% to 30% of the titanium used in Western aerospace still comes from Russia, despite ongoing diversification investments.

FAQ

Is Howmet Aerospace a mega-cap like Boeing or Airbus?

Not quite. Its market cap sits around $90 billion, smaller than Boeing or engine makers like GE Aerospace or RTX. Howmet is neither a plane maker nor an engine maker: it is a critical-parts supplier feeding the engines and airframes those giants build.

What's the difference between Howmet and an engine maker like GE Aerospace or Pratt & Whitney?

GE Aerospace and Pratt & Whitney (a division of RTX) design, assemble, and sell complete engines. Howmet is their supplier: it forges and machines the individual parts, turbine blades, disks, structures, that go inside those engines, without ever selling a complete engine itself.

Is a P/FCF of 54.8 really expensive for this kind of business?

In absolute terms, yes, it is a high multiple. I was not able to pull the full five-year history of this specific P/FCF to place today's level against its own past, a gap I would rather flag than fake a percentile for. My reasonable buy price already builds in my own valuation view despite that limit, and it comes out about 11% below the current share price.

What could push the stock down in the short term?

A slowdown in Boeing or Airbus production rates, tougher sanctions on Russian titanium pushing up costs before Western diversification is fully online, or simply a broad pullback in expensive industrial names. None of these scenarios break the long-term thesis in my view, but any of them could offer a better entry price.

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).