Howmet Aerospace: Navigating the Headwinds of Boeing’s 737 MAX Build Rate Surge
27min read The recent announcement by howmet aerospace (HMPT) that Boeing (BA) will raise its 737 MAX production average to 28 aircraft per month—a 12% increase from prior expectations—has ignited investor curiosity. While the news suggests stronger demand for commercial jets, the path forward for Howmet is anything but straightforward. The company’s role as a critical supplier of engine components, castings, and fasteners positions it at the center of Boeing’s ambitious production targets. Yet tariffs, geopolitical tensions, and supply chain fragility loom as formidable challenges.
The Build Rate Hike: A Double-Edged Sword
Boeing’s decision to accelerate production to 28 per month—and aim for 50 by 2026—reflects confidence in the 737 MAX’s recovery after years of safety and regulatory setbacks. For Howmet, this means heightened demand for its advanced components. The company’s first-quarter 2025 revenue of $1.94 billion, up 6.4% year-over-year, already hints at the tailwinds from this uptick. CEO John Plant’s optimism in raising 2025 profit forecasts to a range of $3.65–$3.85 per share underscores the financial upside.
But the risks are equally stark. Howmet’s contracts with Boeing face pressure from lingering U.S. tariffs on imported components—a 10% tax on parts sourced from Japan, France, Italy, and India. In April 2024, Howmet warned Boeing it might halt shipments unless customers absorbed these costs. While Plant claims the company has passed tariffs to Boeing, renegotiations remain “fluid,” with no guarantees of long-term stability.
Tariffs, Trade, and the Supply Chain Tightrope
The tariff issue is a critical inflection point. Boeing’s 737 MAX program relies heavily on global supply chains, with fuselage sections and engines sourced from countries now subject to U.S. tariffs. Howmet’s push to pass costs upstream has strained contractual terms, and airlines are now demanding tariff-free pricing, amplifying pressure on Boeing’s margins.
The stakes are monumental: Boeing reported an $11.83 billion net loss in 2024, partly due to production bottlenecks and delays in engine deliveries. Howmet’s ability to maintain uninterrupted supply is non-negotiable for Boeing to meet its 2026 target of 50 planes per month. However, FAA production caps and delays in engine components—like those from CFM International—remain unresolved, casting doubt on the feasibility of these goals.
Geopolitical Crosscurrents and the 2025 Outlook
Beyond tariffs, Howmet’s operations are entangled in broader geopolitical shifts. China’s 2024 suspension of Boeing deliveries—driven by U.S.-China trade tensions—has dented Boeing’s cash flow, indirectly affecting Howmet’s revenue streams. Meanwhile, Boeing’s quality control reforms, including a 20-digit tracking system for components, require Howmet to maintain precision in production.
Investors must weigh these risks against Howmet’s financial resilience. The company’s Q1 2025 results beat earnings expectations, with adjusted EPS of 86 cents, and it remains on track to deliver $4.1 billion in 2025 revenue. Yet, tariff exemptions and cost-passthrough agreements are still pending, leaving profitability vulnerable.
Conclusion: A Risky Opportunity with Clear Catalysts
Howmet’s story in 2025 hinges on three factors: resolving tariff exemptions, sustaining production amid supply bottlenecks, and locking in long-term contracts with Boeing. The 28-per-month build rate increase offers a tangible growth catalyst, but the path to 50 planes per month is fraught with regulatory, logistical, and financial hurdles.
The data paints a nuanced picture: Howmet’s 6.4% revenue growth and $1.94 billion in Q1 2025 revenue signal operational strength, while Boeing’s $11.83 billion loss and FAA constraints highlight lingering vulnerabilities. Investors should monitor HMPT’s negotiations with Boeing and the status of U.S. tariff policies. If Howmet can secure stable cost structures and fulfill its supply commitments, its stock could climb alongside Boeing’s recovery. However, missteps in these areas could reverse the gains seen in early 2025.
For now, Howmet remains a critical player in the commercial aviation rebound—a company flying at the intersection of opportunity and risk.
