HWM's EBITDA Momentum Picks Up: Is Margin Expansion Sustainable?

Howmet Aerospace Inc. HWM has consistently delivered margin expansion in the past few quarters, reflecting its commitment to sustaining long-term profitability. In the fourth quarter of 2025, the company’s cost of sales increased 3.4% year over year, driven by higher input costs and net headcount. The metric increased 8.9% and 6.1%, respectively, year over year in the third and second quarters. The same remained flat in the first quarter.

Despite these headwinds, Howmet has maintained consistent margin expansion. The company reported an adjusted EBITDA margin of 28.8% in the first quarter of 2025, 28.7% in the second quarter and 29.4% in the third quarter. In the fourth quarter, HWM sustained this momentum with a margin of 28.7%, marking a 300-basis point improvement from the prior year.

Also, the Engine Products, Fastening Systems and Engineered Structures segments reported margin gains of 290, 290 and 350 basis points, respectively, supported by manufacturing footprint optimization, a favorable product mix and effective pricing actions.

Strong demand from both commercial and defense aerospace markets continues to bolster the company’s overall performance. For 2026, Howmet expects adjusted EBITDA margin to be 30.1-30.5%. The company reported adjusted EBITDA of 29.3% in 2025. Strong pricing and productivity gains are driving Howmet’s margin improvement.

Margin Performance of HWM’s Peers

Among its major peers, GE Aerospace’s GE cost of sales surged 23.7% year over year in the fourth quarter of 2025. GE Aerospace’s operating profit increased 14% year over year. GE Aerospace’s operating margin was 19.2%, down 90 bps year over year.

RTX Corp.’s RTX total costs and expenses increased 10.9% year over year to $22 billion in the fourth quarter of 2025. RTX Corp. generated an adjusted operating profit of $2.6 billion in the fourth quarter. RTX Corp. reported adjusted operating profit of $2.1 billion in the prior-year quarter.

HWM's Price Performance, Valuation and Estimates

Shares of Howmet have surged 69.8% in the past year compared with the industry’s growth of 16.7%.

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From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 48.58X, above the industry’s average of 30.54X. Howmet carries a Value Score of D.

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The Zacks Consensus Estimate for HWM’s 2026 earnings has increased 2.5% over the past 60 days.

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Howmet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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