Howmet Raises 2026 Guidance After Q2 Revenue Rises 24%

Howmet Aerospace (NYSE: HWM ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

View the webcast at Summary Howmet Aerospace reported a 24% year-over-year revenue increase for Q2 2026, with organic growth at 21%. 33. The company repurchased $600 million in shares during the first half of 2026 and retired $186 million of debt. Strategic focus includes optimizing the CAM acquisition for synergy realization in 2027.

Strong growth was noted in commercial aerospace (28% increase) and gas turbines (38% increase) driven by demand for electricity generation. Future outlook includes increased capital expenditure plans, with a focus on sustaining growth in aerospace and gas turbine markets. The company raised its full-year guidance across revenue, EBITDA, and earnings per share, reflecting confidence in continued strong performance. Management emphasized ongoing investments in capacity expansion to meet rising demand, particularly in industrial gas turbines and aerospace markets.

Full Transcript OPERATOR Good day and welcome to the Howmet Aerospace Second Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please limit yourself to one question today. Please note that this event is being recorded.

I would now like to turn the conference over to Paul Luther, Vice President of Investor Relations. Please go ahead. Thank you. Paul Luther, Vice President of Investor Relations Good morning and welcome to the Howmet Aerospace second quarter 2026 results conference call.

I'm joined by John Plant, Executive Chairman and Chief Executive Officer, and Patrick Winterlich, Executive Vice President and Chief Financial Officer. After comments by John and Patrick, we will have a question and answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find the factors that could cause actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings.

In today's presentation, references to EBITDA, Operating Income, and EPS mean Adjusted EBITDA, Adjusted Operating Income, and Adjusted EPS. These measures are among the non-GAAP financial measures that we've included in our discussion. Reconciliations to the most directly comparable GAAP measures can be found in today's press release and in the appendix in today's presentation. In addition, unless otherwise stated, all comparisons are on a year-over-year basis.

With that, I'd like to turn the call over to John. John Plant, Executive Chairman and Chief Executive Officer Thank you, Paul, and good morning everyone, and welcome to the Howmet Q2 earnings call. Let's start with the highlights on slide 4. Howmet completed a successful second quarter.

Revenues were up 24% year over year with strong incremental margins of 46%, and that was after some impact from the CAM acquisition. Excluding all the M&A activity this year, organic growth was very healthy at 21% for the quarter and 20% for the first half. 1%, an increase of 340 basis points year over year, including the absorption of CAM starting in April. 2027 is the focus year for our CAM optimization plan to begin to drive noticeable synergies.

8%. Second quarter free cash flow was just under half a billion dollars, and free cash flow totaled approximately $840 million for the first half. 33, an increase of 46% year over year. A total of $600 million in shares were repurchased in the first half of the year, with $300 million being made in the second quarter.

We continued to repurchase shares in July for a further $200 million, which resulted in repurchases in 2026 already greater than in 2025. In addition, a further $186 million of debt was retired. I'll now pass the call to Patrick, who will set out the end-market growth percentages and provide some segment commentary. Patrick Winterlich, Executive Vice President and Chief Financial Officer Thank you, John.

Good morning everyone. Please move to slide 5. It was another strong quarter for Howmet, with all end markets growing. We are well positioned for the future and continue to invest for growth.

Total revenue was up 24% in the second quarter. Excluding the net impact of the three transactions we completed this year, organic revenue was up 21% year over year, an acceleration from the 19% organic growth rate in the first quarter. Commercial aerospace growth was strong at 28%, with organic growth of 26% driven by demand for both new builds and spares. We continue to see higher spares demand on both legacy and next-generation engines.

Defense aerospace growth continued to be solid at 11%, with organic growth of 7%, reflecting healthy spares activity as well as higher legacy fighter demand. Commercial transportation revenue was up 12% driven by the pass-through of higher aluminum costs. On a volume basis, wheels was down 8%. However, on a sequential basis, wheels volumes were up 7% as the North American market began to recover.

Gas turbine growth remained very strong with revenue up 38%. Gas turbine growth is driven by the increased demand for electricity generation, especially from natural gas for data centers. Growth in other markets of 39% was largely driven by the Brunner Fastener acquisition completed in February. Within Howmet's markets, spares growth remained robust.

Total spares revenue across the commercial aerospace, defense aerospace, and gas turbine markets was up 37% to approximately $560 million. Spares represent a greater portion of our total revenue than historically, now at approximately 22% through the first half of 2026. In summary, continued strong performance in commercial aerospace, defense aerospace, and gas turbines, with the commercial transportation market recovery underway. Moving to slide 6, starting with the P&L: second quarter revenue, EBITDA, EBITDA margin, and earnings per share all exceeded the high end of guidance.

On a year-over-year basis, revenue was up 24% and 21% organically, the strongest quarterly growth rate for the company since the first quarter of 2023. EBITDA continued to outpace revenue growth, up 39%, the strongest growth in EBITDA since the third quarter of 2021. 1%. Despite a modest headwind from the CAM acquisition, incremental flow-through of revenue to EBITDA was healthy at 46% year over year.

33, up 46% year over year. Now let's cover the balance sheet and cash flow. The balance sheet remains strong with a quarter-end cash balance of $564 million. Free cash flow in the quarter was excellent at $479 million.

4 times. Following the completion of the CAM acquisition during the quarter, we paid down our $186 million Japanese yen term loan due November 2026. In addition, during the quarter we entered into a cross-currency swap to synthetically convert our $300 million note due 2028 into a Japanese yen liability. The combined effect of these two actions saves approximately $12 million in annualized interest expense.

Liquidity remains strong with an undrawn $1 billion revolver complemented by a $1 billion commercial paper program, $450 million of which was drawn to support the CAM acquisition. Turning to capital deployment, CapEx was $104 million in the quarter. The majority of our capital spend continues to be in the Engine Products segment as we continue to invest for growth in both the aerospace and gas turbines markets. Investments are backed by customer contracts.

In the quarter, we repurchased $300 million of common stock at an average price of $251 per share. We repurchased an additional $200 million in July at an average price of $277 per share. This brings year-to-date repurchases to $800 million at an average price of $248 per share as of today. The remaining authorization from the Board of Directors for share repurchases is approximately $700 million.

We continue to be confident in strong future free cash flow. 14 per share, payable this August. 8 billion, and the integration is on track. Now let's move to slide 7 to cover the segment results for the second quarter.

The Engine Products team delivered another excellent quarter for revenue growth, EBITDA, and EBITDA margin. 37 billion. Commercial aerospace was up 37% and defense aerospace was up 17%. The gas turbines market was up 38%.

Demand continues to be strong, both original equipment and spares. EBITDA outpaced revenue growth with an increase of 51% to $517 million. 7% while absorbing approximately 485 net new employees in the quarter, positioning us well for future growth. Please move to slide 8.

Fastening Systems had another solid quarter. Revenue increased 37% to $589 million, including the impact of the CAM and Brunner acquisitions. Commercial aerospace was up 39% and defense aerospace was up 45%. Commercial transport was flat year over year excluding the impact from acquisitions.

Total fasteners growth was double digits. EBITDA outpaced revenue growth with an increase of 40% to $177 million. 1%, reflecting continued operational execution. As expected, margins declined sequentially driven by the addition of the CAM business in the second quarter.

Moving to slide 9, the Engineered Structures team continues to drive improvement in the business. Revenue declined 13% to $269 million due to the divestiture of the Savannah Disk forging facility on March 31. Excluding the impact of Savannah, revenue growth was approximately flat. We continue to focus on higher margin and stronger return opportunities in the business.

8% as we continue to optimize the Structures segment to maximize profitability. Finally, please turn to slide 10. Forged Wheels delivered another healthy quarter. Revenue was up 14% as an 8% decrease in volume was more than offset by higher aluminum pass-through.

Volumes rose 7% from the first quarter as the North American market began to recover. EBITDA was $88 million, an increase of 16% despite lower volume. EBITDA margin increased 30 basis points year over year but declined 270 basis points sequentially, reflecting the dilutive effect of sharply higher aluminum cost pass-through. Higher metal pass-through diluted margins by approximately 360 basis points year over year but had no material impact on EBITDA dollars.

This dilutive impact on margin percentage is likely to continue at least for the next couple of quarters. EBITDA dollars were largely unchanged sequentially. We continue to outgrow the market, driven by our premium products. Now let me turn the call back to John.

John Plant, Executive Chairman and Chief Executive Officer Thank you, thank you Patrick, and please move to Slide 11. Let me turn to the outlook first. As you can see, the first-half target outcomes have been achieved while also facing a turbulent economic and political backdrop. The tailwinds experienced have reflected more robust build rates for commercial aircraft and also positive order intake for commercial truck builds.

In addition, IGT demand has been extraordinary. Moving specifically to commercial aerospace, the ongoing conflict in the Middle East has resulted in increased volatility of jet fuel and gasoline prices and has impacted recent commercial air traffic activity. Howmet Aerospace has not experienced any changes in customer demand throughout the conflict to date; air freight volumes have continued to strengthen. At the same time, interest rates have climbed reflecting higher inflationary signals, and the outlook for near-term rate cuts has dimmed.

Despite the issues in the Middle East, orders for new aircraft have continued to grow and the overall backlog has increased. This bodes well for future aircraft build rates, with increases being seen for the balance of 2026 into 2027 and beyond. The business jet segment also continues to be strong, with increases both in new aircraft build and spares. Defense sales also continue to be strong, especially for spares and legacy aircraft, with the F-35 build continuing to be solid.

The near-term outlook for our missile business continues to strengthen, with demand increases being either seen or signaled for the PAC-3, THAAD, Tomahawk, and some classified programs. The focus on engines for large missiles, drones, and collaborative combat aircraft continues, with growth expected in the medium term. Turning to gas turbines, we have completed negotiations with the last of our seven major customers, though the overall picture continues to expand, with some customers already wanting to revisit and add to their demand outlooks.

This gas turbine demand growth, for large, small, and medium-sized turbines, is further supported by new gas turbine blade applications and also increased new product technology introductions, and these will help Howmet Aerospace to outgrow its current market share. Our capital expenditure requirements continue to increase and, while this year we are now likely to exceed $500 million in capital spend, we are already seeing the need to further increase this in 2027. This increased level of capital expenditure provides support to our future organic growth expectations.

The outlook for free cash flow conversion and net income is maintained at our 90% target conversion throughout the period. The resultant cash flows to date have enabled us to deploy capital for organic growth, execute share buybacks, and support dividend growth while also absorbing a significant acquisition. Continued healthy cash generation should allow us to return our leverage level back to approximately one times net debt to EBITDA by year-end, the same level that we exited 2025.

Given the level and the high level of our capital expenditure, plus our acquisitions of almost $2 billion and the share buybacks of an amount already exceeding 2025, our leverage level is very comfortable and allows us to consider all paths of optionality going forward. Moving now to the commercial truck wheels business, the results are strong. Even after coping with extraordinary increases in the aluminum LME and Midwest premiums, growth into the second quarter accelerated and the outlook for the balance of year looks healthy, with external forecasters now envisaging an even stronger 2027. 35 plus or minus a penny.

04. 9 billion plus or minus $50 million. These guide increases are across the board given our growing confidence in the year. In closing, the Howmet Aerospace team delivered a solid first-half performance with prospects for further growth and a robust second half.

As outlined in November at our Q3 earnings call, we expect to provide our first sighting at the 2027 revenue, which we expect will be an increase over 2026. And with that, we'll now move to the Q&A session. OPERATOR Thank you. We will now begin the question-and-answer session.

To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question at this time.

We will pause momentarily to assemble our roster. The first question today comes from Sheila Kayaola with Jefferies. Please go ahead. T.

John, you noted IGT customers continue to revise upward their demand outlook, and I don't blame them. Who wouldn't want more? You're talking about higher CapEx for the foreseeable future. What are you seeing in the competitive dynamics at play in the IGT market in terms of the technology advantage you have, the scale at which you could produce, and how are you thinking about your own ability to support these ramps as a few of your peers also seek new business there?

Thank you. John Plant, Executive Chairman and Chief Executive Officer Thanks, Sheila, and good morning to you. Let's deal with scale first, and I think I'll start off with saying it's important to note that Howmet Aerospace has a market share in excess of 50% globally for turbine blades in the IGT markets and therefore the growth of that market is dependent upon our willingness to invest, which we're doing.