Howmet raises 2025 forecast on robust aerospace demand, but shares fall on concerns 

By Utkarsh Shetti and Dan Catchpole

(Reuters) -Howmet Aerospace on Thursday lifted its full-year forecasts, buoyed by strong demand for its fasteners and engine components due to ramping jet production.

Shares fell 8%, however, amid concerns that the increase was likely conservative given the stock's high valuation after a strong rally this year.  

Growing demand for air travel has led airlines to order more new jets, prompting plane makers to accelerate production and benefiting aerospace suppliers such as Howmet, whose customers include Airbus and Boeing.

Increases in narrow-body jetliner production, particularly the Boeing 737 MAX, contributed to the company's raising of its annual revenue projection by $100 million to $8.13 billion at baseline.

Howmet's rate of growth in its guidance relative to its previous year and high valuations after a strong rally weighed on momentum, said Brian Mulberry, portfolio manager at Zacks Investment Management, which holds Howmet shares.

The company's stock is up nearly 60% so far this year. Howmet shares were down 8% at $176.90 on Thursday afternoon.

"Guidance still calls for compression in the back half, but there is likely some conservatism in that outlook, especially for Q4," J.P.Morgan analyst Seth Seifman said in a note.

Going forward, the company plans to support 737 MAX production assuming a rate of 33 aircraft a month, up from 28 a month, Howmet CEO John Plant said during a conference call with investment analysts.

Boeing already increased its output to 38 airplanes a month, but the company had built up substantial inventory. Howmet expects Boeing to maintain that rate throughout the rest of the year, he said.

The planemaker delivered 206 737 MAX jets through the first half of the year, compared with 135 a year earlier.

Build rate for the Airbus A320 is not clear due to fluctuating supplies from that program's engine makers, he said. 

Airbus' engine delays from CFM International, co-owned by GE Aerospace and Safran, have spread to its RTX-owned rival Pratt & Whitney in the wake of a recent strike, the European planemaker said on Wednesday.

Some prior delays as a result of supply-chain bottlenecks have forced airlines to extend the lifespan of older aircraft, resulting in a surge in orders for aftermarket parts for Howmet.

However, U.S. President Donald Trump's broad tariffs on aluminum and steel, alongside levies on trading partners, have stressed the fragile aerospace supply chain and pushed up costs.

Demand for Howmet's aerospace fasteners continued to grow during the last quarter, but the contributions to the company's bottom line were dampened by the tariffs, Plant said.

The Pennsylvania-based company has said it intends to pass on inflated costs to customers through price hikes to cushion the hit from tariffs.

The company has also added about $40 million in revenue from fastener orders it picked up in the wake of a February fire at a competitor's plant in Pennsylvania, he said. 

Howmet also raised its annual adjusted profit forecast to between $3.56 and $3.64 per share, from an earlier projection of $3.36 to $3.44 per share.

Its second-quarter revenue rose 9.2% to $2.05 billion, driven by an 8% increase in commercial aerospace sales. Analysts estimated $2.01 billion, according to data compiled by LSEG.

On an adjusted basis, the company earned 91 cents per share, also above expectations of 87 cents per share.

(Reporting by Utkarsh Shetti in Bengaluru and Dan Catchpole in Seattle; Editing by Shilpi Majumdar and Matthew Lewis)