Industrials
The negative commercial aero demand outlook that Northcoast first communicated in Jun, may turn out to be incorrect after all. The situation appears to be much worse than expected. Global market headwinds are intensifying for upstream aerospace suppliers due to widespread inventory reduction efforts and a sharp drop in tier-one customer orders. Companies levered to titanium, forged products and aero fasteners appear to be in an especially vulnerable position. Northcoast interprets their latest channel insights to be another bearish indicator for HWM still believing CY25 earnings estimates to be overly aggressive and the shares to be overbought heading into a new period of negative headlines.
Edition: 194
- 06 September, 2024
Industrials
Pete Skibitski forecasts double digit organic top line growth in 2022/23, with mid/high single digit growth in 2024/25. This drops down to solid double digit adjusted EPS growth through 2025. In a potentially challenged 2023 macro environment, Pete prefers aerospace stocks with commercial OE exposure as opposed to aftermarket. His current deliveries forecast for commercial jets shows double digit growth in units through 2024, with 2025 at high single digits. HWM's $437m of structural cost reductions (2019-21), along with $214m of core price increases, augers well for margin expansion on expected higher volumes.
Edition: 147
- 28 October, 2022
Industrials
Unappreciated quality - after splitting out Arconic, this critical component manufacturer is now a more focused, higher margin company. Capex is fading as volume increases and fixed-cost cuts during Covid look to be permanent giving high incremental FCF for the next 3-4 years. HWM trades at ~5% 2023 FCF yield and 13x 2022 EV/EBITDA, yet it will grow earnings ~30% annually from 2021-23. Abacus analysts see minimal downside even in their bearish scenario. TP $46 (35% upside).
Edition: 127
- 21 January, 2022