On Monday, Jefferies maintained its Buy rating on Howmet Aerospace Inc. (NYSE: HWM (BMV:HWM)) and increased the price target to $80 from $74. The firm's assessment is based on a projected build rate of 29.5 per month for Boeing (NYSE:BA)'s 737 in 2024, with Howmet's estimate now at 31 per month, down from the previous 34 per month. This adjustment leads to a 2% reduction in the anticipated 2024 revenues to $7.0 billion, considering potential impacts from labor costs if the production rate does not increase as expected.
The revised forecast also includes a 4% decrease in the 2024 EBITDA estimate to $1.60 billion. The analysis suggests that year-over-year incremental margins will remain stable at 25%, contributing to an adjusted earnings per share (EPS) of $2.10, which aligns with the lower end of the company's guidance range of $2.10 to $2.20. Free cash flow (FCF) conversion is expected to be at the lower end of the spectrum, at 82%.
Howmet Aerospace's stock performance has been notable, with a year-to-date increase of 27%, now trading at 25 times price-to-earnings (P/E) ratio. The firm indicates that the first quarter could present a new opportunity for investors to engage with Howmet Aerospace, which is seen as a preferred choice to capitalize on the original equipment (OE) upcycle.
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