Howmet Rallies 87.7% in a Year: Should You Buy the Stock or Wait?

Howmet Aerospace Inc. (HWM) shares have surged 87.7% over the past year, significantly outperforming peers, driven by strong demand in commercial aerospace (up 8% in Q2 2025) and defense aerospace (up 21% in Q2 2025), alongside increased dividends and expanded share repurchase programs. Despite this momentum, the company faces headwinds from a weak commercial transportation market and elevated input costs. HWM's valuation is a concern, trading at a forward 12-month P/E of 46.53X, substantially above the industry average of 29.47X, leading analysts to suggest a 'Hold' for current shareholders and advising new investors to await a more attractive entry point.

Analysis

Howmet Aerospace Inc. (HWM) shares have demonstrated significant outperformance, surging 87.7% over the past year and exceeding the S&P 500 and industry growth, driven by robust demand in its core segments. Commercial aerospace revenues increased 8% year-over-year in Q2 2025, constituting 52% of the business, while defense aerospace sales jumped 21% in the same period, primarily due to strong F-35 engine orders and government support.

This positive momentum is further bolstered by HWM's commitment to shareholder returns, evidenced by $83 million in dividends and $300 million in share repurchases during the first six months of 2025. The company also announced a 20% quarterly dividend hike to 12 cents per share and an additional $2 billion increase to its share repurchase program.

However, HWM faces notable near-term headwinds, including persistent weakness in the commercial transportation market, which saw revenues decline 4% year-over-year in Q2 2025. Additionally, the company continues to grapple with elevated input costs, contributing to a 3% increase in the cost of goods sold in the first half of 2025.

Valuation remains a significant concern, with HWM trading at a forward 12-month P/E ratio of 46.53X, substantially higher than the industry average of 29.47X and peers like L3Harris Technologies (25.77X) and Textron (13.06X). Despite stable earnings estimates projecting 32.7% growth for 2025, this premium valuation could limit near-term upside and increase vulnerability to market sentiment shifts.

Key Decisions for Investors

• Current shareholders should consider maintaining their positions, given the strong performance in aerospace segments and consistent shareholder return policies.
• New investors should exercise caution and await a potential pullback to a more attractive entry point, considering the stock's premium valuation relative to its industry and peers.
• Monitor the commercial transportation segment for signs of recovery and track input cost trends, as these represent key near-term headwinds for HWM's profitability.