Howmet Aerospace (HWM) can benefit from increased spending on fighter jets, other military planes, space travel, and drones. Further, the company reported strong fourth-quarter financial results and provided favorable 2026 guidance.
Nonetheless, Howmet in Q4 generated slightly over 50% of its revenue from the commercial aerospace sector which is being meaningfully undermined by the Iran War and the current standoff between the U.S. and Iran. Consequently, investors should avoid buying HWM stock at this point.
A Look at Howmet’s Main Businesses
Specializing in manufacturing components for aircraft, the company reports that it “can produce more than 90 percent of all structural and rotating aero engine components.”
For militaries, Howmet markets products that “maximize speed, agility and survivability.” It has provided components of the F-35 Joint Strike Fighter and utilizes “cutting-edge metal joining technologies” that reduce defense systems’ thermal footprints.
Howmet’s products also facilitate space travel. Indeed, its products will be incorporated into the rocket that will power NASA’s Artemis II mission.
And the company has agreed to acquire Consolidated Aerospace Manufacturing Defense Group which provides components for drones, satellites and robotics. All of the latter sectors are growing rapidly.
Of Howmet’s total Q4 revenue, 17% was derived from Defense Aerospace products and 12% was generated from selling offerings used in Gas Turbines. Both of these business are quickly, as their revenue increased 20% and 32%, respectively, in Q4 versus the same period a year earlier.
But the Commercial Aerospace sector, which accounted for 53% of its revenue in Q4, is being meaningfully undermined by the Iran War, making its outlook uncertain.
The Problems Facing Commercial Aerospace
The CEO of discount European airlines Ryanair, Michael O’Leary, on April 28 stated that multiple European airlines would have “financial difficulties” if jet fuel prices remain elevated amid the standoff between America and Iran.
It’s possible that a number of U.S. airlines, which are also dealing with elevated jet fuel prices, could have significant problems going forward.
Because of this situation, some airlines could reduce their spending on new planes, denting Howmet’s commercial aerospace business meaningfully.
Impressive Q4 Results and Strong 2026 Guidance
In Q4, the company’s revenue jumped 15% versus the same period a year earlier to $2.17 billion, while its operating income, excluding certain items, soared 34% year-over-year to $580 million.
In March, the company estimated that its revenue would advance 10% in 2026, and it estimated that its adjusted EBITDA would climb 14% this year.
Valuation and the Bottom Line on HMT Stock
The shares are changing hands at a forward price-earnings ratio of 52.6 times. While that’s a slightly attractive valuation given the company’s growth, guidance, and positive catalysts, the uncertain outlook of its Commercial Aerospace unit makes the stock’s risk-reward ratio negative for now.
Consequently, investors should avoid the name until its price falls or the problems facing airlines meaningfully ease.
*This article is intended to be informational only; it is not financial advice.
