Aerospace and defense company Howmet (NYSE: HWM) announced better-than-expected revenue in Q3 CY2025, with sales up 13.8% year on year to $2.09 billion. The company expects next quarter’s revenue to be around $2.1 billion, close to analysts’ estimates. Its non-GAAP profit of $0.95 per share was 4.5% above analysts’ consensus estimates.

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Company Overview

Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Howmet grew its sales at a mediocre 6.8% compounded annual growth rate. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Howmet.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Howmet’s annualized revenue growth of 11.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Engine products and Fastening systems, which are 52.9% and 21.4% of revenue. Over the last two years, Howmet’s Engine products revenue (aircraft engines, industrial turbines) averaged 14.4% year-on-year growth while its Fastening systems revenue (connector products and tools) averaged 15.6% growth.

This quarter, Howmet reported year-on-year revenue growth of 13.8%, and its $2.09 billion of revenue exceeded Wall Street’s estimates by 2.3%. Company management is currently guiding for a 11.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.8% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is admirable and implies the market sees success for its products and services.

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Operating Margin

Howmet has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 19.6%.

Looking at the trend in its profitability, Howmet’s operating margin rose by 8.4 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Howmet generated an operating margin profit margin of 25.9%, up 3 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Howmet’s EPS grew at an astounding 21.6% compounded annual growth rate over the last five years, higher than its 6.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Howmet’s earnings to better understand the drivers of its performance. As we mentioned earlier, Howmet’s operating margin expanded by 8.4 percentage points over the last five years. On top of that, its share count shrank by 7.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Howmet, its two-year annual EPS growth of 42.7% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Howmet reported adjusted EPS of $0.95, up from $0.71 in the same quarter last year. This print beat analysts’ estimates by 4.5%. Over the next 12 months, Wall Street expects Howmet’s full-year EPS of $3.46 to grow 18.1%.

Key Takeaways from Howmet’s Q3 Results

Revenue and EBITDA in the quarter exceeded expectations. While revenue guidance for next quarter was only in line, full-year EBITDA guidance came in ahead of expectations. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 3.5% to $196.60 immediately following the results.

Big picture, is Howmet a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.