Howmet Aerospace's IGT Capacity Timelines and Gas Turbine Revenue Outlook Clash in 2026 Q2 Earnings Call

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $4.1B for Q2, up 24% YOY; $10.05B for full year, up from prior guide
• EPS: $1.33 per share, up 46% YOY
• Operating Margin: 28.8% for Q2; EBITDA margin 32.1%, up 340 basis points YOY

Guidance:

• Q3 Revenue: $2.75B ± $10M; EBITDA: $830M ± $5M; EPS: $1.35 ± $0.01.
• Full-Year Revenue: $10.05B ± $50M; EBITDA: $3.23B ± $20M; EPS: $5.27 ± $0.04; Free Cash Flow: $1.9B ± $50M.
• Expect to provide 2027 revenue guidance in November, which is expected to increase over 2026.
• Target free cash flow conversion and net income at 90% throughout the period.
• Expect to return leverage to ~1x net debt to EBITDA by year-end.

Business Commentary:

Revenue and EBITDA Growth:

• HowMet Aerospace reported revenue growth of 24% year-over-year for Q2, with organic growth at 21%, and EBITDA up 39%, the strongest since Q3 2021.
• The growth was driven by strong demand across commercial aerospace, defense aerospace, and gas turbine markets, including the impact of acquisitions and higher spares demand.

Commercial Aerospace and Gas Turbine Demand:

• Commercial aerospace revenue increased by 28%, with organic growth at 26%, while gas turbine revenue grew by 38%.
• These increases were due to robust demand for new builds and spares, as well as increased demand for electricity generation, particularly from natural gas for data centers.

Share Repurchase and Debt Reduction:

• The company repurchased $300 million worth of shares in Q2 and an additional $200 million in July, with a total of $600 million repurchased in the first half of the year.
• This aggressive share repurchase, along with retiring $186 million of debt, reflects the company's strong cash flow generation and its strategy to enhance shareholder value.

Fastening Systems and Engine Products Performance:

• Fastening systems revenue rose by 37%, including acquisitions, with EBITDA up 40%, and Engine Products revenue increased by 32%, with EBITDA up 51%.
• The performance was driven by strong demand in commercial and defense aerospace segments, supported by investments in new capacity and technology.

Capital Expenditure and Future Growth:

• Capital expenditure in Q2 was $104 million, with plans to increase it further in 2027 to support new plant expansions and technology introductions.
• Increased capital spending is aimed at supporting future organic growth, with a focus on industrial gas turbines and commercial aerospace.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'Hammett completed a successful second quarter' with 'strong incremental margins' and results exceeding guidance. They noted 'continued strong performance' across key markets, 'robust' spares growth, and 'excellent' free cash flow. The outlook is 'positive' with 'growing confidence in the year' and 'prospects for further growth and a robust second half'.

Q&A:

• Question from Sheila Kaya Ola (Jefferies): What are you seeing in the competitive dynamics in the IGT market regarding technology advantage and scale, and your ability to support demand ramps?
  Response: Hammett has >50% global market share for turbine blades in IGT and is investing significantly in new capacity (e.g., Japan, Europe, Virginia). Demand growth is expected to be split between equiax and directionally solidified parts for next few years, with future move to single crystal blades. Capex will increase notably in 2027 for both IGT and commercial aerospace.

• Question from Doug Harned (Bernstein): How quickly can you respond to IGT demand increases and deliver products?
  Response: Responded with 30-35% revenue growth in 2026 via yield improvements and existing capacity. New capacity (e.g., casting machines in Japan) is coming online in 2027-2029. For new gigawatt commitments, earliest delivery would be late 2028/2029, with progressive build-out planned.

• Question from Robert Stallard (Vertical Research): What are you seeing in aerospace OEM and wide-body market rates, and does Hammett have enough capacity?
  Response: Expect wide-body build rates to increase over next 2-3 years (Boeing 787, Airbus A350). Manufacturing equipment is similar across narrow and wide-body, so capacity is based on overall market. A new plant committed last week and expansions planned to support rate increases.

• Question from Robert Stallard (Vertical Research): Is commercial aerospace growth benefiting from multi-chemistry coatings, and what is the growth opportunity?
  Response: Yes, capacity for multi-chemistry coatings is being expanded, including new coating guns and pits. The company is nearing completion of coating facilities and is considering plant expansion to accommodate advanced equipment with a ~3-year lead time.

• Question from Robert Stallard (Vertical Research): How far along is utilization of new commercial aero capacity, and what's the sequential growth trajectory?
  Response: Some installed machines are still ramping to full rate, and employee base is being built out. Additional equipment will be installed through H2 2026 and beyond. Further investments are needed to meet customer-stated rates, considering both narrow and wide-body demand plus spares.

• Question from Ken Herbert (RBC Capital Markets): Where is the industry in supporting higher aerospace production rates (25-30% above pre-pandemic peaks) in 3-4 years, and what drives capacity investment?
  Response: Difficult to predict exact demand sustainability. Focus is on monitoring aircraft backlogs and true demand patterns. Hammett will invest based on likely rate increases but will manage inventory and workforce recruitment to stay within capacity envelope, considering industry-wide supply chain readiness.

• Question from Miles Walton (Wolf Research): Are you seeing pull on wide-body fasteners, and what's the update on LEAP and GTFA cutovers?
  Response: Beginning to see demand for higher 787 rates (above 6-7). LEAP 1A/B cutover to new technology blades will occur in 2027, with inventory built for smooth transition. GTFA production is increasing monthly, but full volume for legacy blades will continue in H2 2026, with GTFA retrofit program expected to be larger.

• Question from Robert Stallard (Vertical Research): How is defense spares demand affected by heavy utilization (e.g., F-35 in Iran), and is this driving incremental capex?
  Response: Not seeing increased spares demand yet from additional missions flown, but discussions with customers indicate a significant increase is expected, likely in 2027. Missile program rate increase proposals are active but not yet formalized. This demand is competing for Virginia plant capacity.

• Question from Robert Stallard (Vertical Research): What is the timeline for synergies from the CAM acquisition?
  Response: First three months focused on IT system upgrades and employee integration. Operational synergies (supply base, distribution) will start in H2 2026, with majority in 2027. EPS impact expected to be break-even in 2026, positive in 2027 and beyond.

• Question from Robert Stallard (Vertical Research): Given strong free cash flow, what is your view on M&A opportunities and capital deployment?
  Response: Leverage remains comfortable (~1x net debt to EBITDA). Expect to increase buybacks in 2027 and remain predisposed to bolt-on M&A (likely <$2-3B) that offers quality and synergistic benefits, while continuing to build high-growth, high-margin company.

Contradiction Point 1

IGT Capacity Ramp Timeline

Timeline for new IGT capacity becoming operational appears to have shifted.

Doug Harned (Bernstein) - Doug Harned (Bernstein)

2026Q2: New capacity (e.g., large casting machines in Japan) will become operational in 2028–2029, with some earlier contributions in 2027. - John Plant(CEO)

How quickly can HowMet fulfill new IGT demand agreements from signing to delivery? - Doug Harned (Bernstein)

2026Q2: New gigawatt-scale capacity for IGT is expected to come online in 2028, 2029, and into 2030. - John Plant(CEO)

Contradiction Point 2

Commercial Aerospace Capacity Utilization & Growth Outlook

Characterization of new capacity utilization and the growth trajectory seems inconsistent.

Robert Stallard (Vertical Research) - Robert Stallard (Vertical Research)

2026Q2: Some newly installed machines are still ramping to full rate... More equipment will be installed in H2 2026 from prior commitments. Growth is expected to continue for the next 4–5 years... - John Plant(CEO)

What is the current utilization rate of new capacity and the outlook for sequential ramp in commercial aerospace sales? - Doug Harned (Bernstein)

2026Q2: Howmet's 2026 revenue growth has exceeded expectations... New gigawatt-scale capacity for IGT is expected to come online in 2028, 2029, and into 2030. Growth is expected to continue over the next four to five years... - John Plant(CEO)

Contradiction Point 3

IGT Market Growth Drivers

Contradiction on whether market growth is dependent on Howmet's capacity or driven by external factors like hyperscaler spending.

Sheila Kaya Ola (Jefferies) - Sheila Kaya Ola (Jefferies)

2026Q2: HowMet holds over 50% market share in turbine blades for IGT, meaning market growth depends on their capacity. - John Plant(CEO)

How are competitive dynamics in the IGT market impacting your ability to support demand ramps, especially as peers also seek new business? - Ron Epstein (Bank of America)

2026Q1: IGT represents a significant organic growth opportunity. Howmet is cautiously optimistic, focusing on understanding market dynamics, hyperscaler investments, and data center demand. - John Plant(CEO)

Contradiction Point 4

Capacity Utilization Outlook

Contradiction on the timeline and status of new capacity coming online to support growth.

Doug Harned (Bernstein) - Doug Harned (Bernstein)

2026Q2: Current 2026 revenue growth (30–38%) has been driven by yield improvements on the existing asset base. New capacity (e.g., large casting machines in Japan) will become operational in 2028–2029, with some earlier contributions in 2027. - John Plant(CEO)

What is HowMet's timeframe for fulfilling new IGT demand agreements from signing to delivery? - Myles Walton (Wolfe Research)

2026Q1: New capacity from the Wada Works plant in Japan will come online in Q4 2026. The company is cautious on near-term yield gains but confident in progressive production increases each quarter in 2026 and into 2027. - John Plant(CEO)

Contradiction Point 5

Gas Turbine vs. Commercial Aerospace Revenue Potential

Contradiction on whether gas turbine revenue could surpass commercial aerospace revenue.

Sheila Kaya Ola (Jefferies) - Sheila Kaya Ola (Jefferies)

2026Q2: HowMet holds over 50% market share in turbine blades for IGT... HowMet is well-positioned to meet demand, grow with the market, and increase its share via new product introductions. - John Plant(CEO)

How do you view your ability to support demand ramps in the IGT market given peers are also seeking new business? - Scott Deuschle (Deutsche Bank AG)

2025Q4: It is not anticipated that gas turbine revenue will exceed commercial aerospace revenue. - John Plant(CEO)