Howmet Aerospace: Rating Upgrade As Near-Term Demand Outlook Can Support A Premium Multiple

Summary

• Upgraded Howmet Aerospace to a buy rating due to robust near-term growth outlook and potential for higher valuation multiples.
• Tight global aerospace supply chains boost HWM’s aftermarket segment as airlines rely on older aircraft, increasing maintenance and part replacement needs.
• Industrial gas turbines (IGTs) present significant growth potential for HWM, driven by AI and data center energy demands and regulatory tailwinds.
• Despite high valuation concerns, strong growth catalysts and market sentiment justify a buy rating, but investors should size positions carefully to mitigate risks.

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Investment overview

I wrote about Howmet Aerospace (NYSE:HWM) previously in August 2024 with a hold rating because I was worried about the lack of margin of safety despite the strong fundamental outlook. I

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.