Do Howmet's Strong Q2 Margins Signal Further Upside for the Stock?

Howmet Aerospace Inc. HWM continues to strengthen its margins, supported by robust second-quarter performance. In the second quarter of 2026, the company’s cost of goods sold rose 16.9% year over year to $1.60 billion, while selling, general, administrative and other expenses increased 66.3% to $148 million. This followed a 13.1% increase in cost of goods sold to $1.46 billion and a 30.6% rise in SG&A expenses to $111 million in the first quarter.

Despite these headwinds, Howmet has maintained consistent margin expansion. The company reported an adjusted EBITDA margin of 32.1% in the second quarter of 2026, up 340 basis points year over year, compared with 32.0% in the first quarter. Adjusted operating income increased 41% year over year to $733 million in the second quarter, while the adjusted operating margin expanded 350 basis points to 28.8%.

Also, the Engine Products, Fastening Systems and Engineered Structures segments reported margin gains of 470, 90 and 170 basis points, respectively, in the second quarter, supported by strong commercial and defense aerospace demand, acquisition contributions, productivity gains and product rationalization. Forged Wheels also posted a 30-basis-point margin improvement.

Strong demand from both the commercial and defense aerospace markets continues to support the company’s overall performance. For 2026, Howmet expects adjusted EBITDA margin to be 30.1-30.5%. Strong pricing and ongoing productivity improvements are expected to support Howmet’s margin expansion in 2026.

Margin Performance of HWM’s Peers

Among its major peers, RTX Corp.’s RTX total costs and expenses increased 12.8% year over year to $22 billion in the second quarter of 2026. RTX Corp. generated an operating profit of $2.81 billion in the second quarter. RTX Corp. reported adjusted operating profit of $2.15 billion in the prior-year quarter.

Another peer of HWM, GE Aerospace’s GE cost of sales surged 26.7% year over year in the second quarter of 2026. GE Aerospace’s operating profit increased 18% year over year. GE Aerospace’s operating margin was 21.7%, down 130 bps year over year.

HWM's Price Performance, Valuation and Estimates

Shares of Howmet have surged 58.6% in the past year against the industry’s decline of 0.6%.

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From a valuation standpoint, HWM is trading at a forward price-to-earnings ratio of 46.38X, above the industry’s average of 32.26X. Howmet carries a Value Score of F.

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The Zacks Consensus Estimate for HWM’s 2026 earnings has increased 6.5% over the past 60 days.

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Howmet currently carries a Zacks Rank #2 (Buy). 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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