Howmet Q2 Earnings Preview: Should You Buy the Stock Now or Wait?

Howmet Aerospace (HWM) is anticipated to report strong Q2 2025 results, with projected EPS growth of 29.9% and revenue growth of 5.8%, primarily fueled by robust demand in its commercial and defense aerospace segments. However, despite a recent 37.4% stock surge and a history of earnings beats, significant valuation concerns persist as HWM trades at a forward P/E of 48.79x, well above the industry average, compounded by weakness in its commercial transportation segment and ongoing supply chain and Boeing production challenges, suggesting a cautious investment stance ahead of its July 31 earnings release.

Analysis

Howmet Aerospace is positioned for a strong second-quarter performance, with consensus estimates forecasting a 29.9% year-over-year increase in EPS to $0.87 and a 5.8% rise in revenue to $1.99 billion. This anticipated growth is anchored by robust momentum in its key aerospace divisions; the commercial segment is expected to grow revenues by 6.9% driven by strong air travel and demand for new aircraft, while the defense segment is projected to expand by a significant 18.3% due to sustained government spending on programs like the F-35. However, these positive drivers are offset by considerable headwinds. The Forged Wheels segment is expected to see an 11.8% revenue decline from weakness in commercial transportation, and the company's performance is further exposed to production slowdowns at Boeing and persistent, albeit moderating, supply-chain disruptions. Despite a strong stock performance, with a 37.4% gain in the last three months, a key concern is the company's stretched valuation, indicated by a forward P/E ratio of 48.79X, which is substantially higher than the industry average of 28.11X and peers, making the stock vulnerable to a correction if results or guidance fall short of elevated expectations.

Key Decisions for Investors

• Given the stock's elevated forward P/E of 48.79X and its recent 37.4% price run-up, investors should be cautious as the current valuation likely prices in a perfect earnings scenario, leaving little room for error.
• It may be prudent to await the July 31 earnings report to assess management's updated guidance on the impact of Boeing's production rates and the outlook for the underperforming commercial transportation segment before committing new capital.
• Current holders should monitor for any commentary on margin pressure from supply-chain costs, as this could be a key factor determining profitability despite the strong top-line growth in the aerospace divisions.