Aerospace components are in high demand, setting up a positive outlook for suppliers including Howmet Aerospace (HWM +1.08%).
Howmet shares climbed 15.7% in January, according to data provided by S&P Global Market Intelligence, as a number of analysts spotlighted the company among potential winners in 2025.
Strong demand from multiple areas
Howmet makes fasteners and other components that go into aircraft, engines, turbines, and other industrial goods, with more than half of its revenue coming from commercial aerospace. That's a hot market right now, with Boeing and Airbus struggling to keep up with demand for new jets.
Howmet has opportunities to benefit as new planes are manufactured but also should benefit from delays. Spare parts for existing equipment tend to be more profitable than sales to new builds, and a waiting list for new planes means that airlines are forced to operate their existing fleets for longer than they might otherwise have intended.
With global air travel expected to grow by 2% to 3% annually over the next decade, there will be ample long-term demand for aircraft.
Throw in growing demand for industrial gas turbines to fuel data centers, and there are a lot of ways for Howmet to grow in 2025.
Wall Street is excited about the opportunity, with at least two investment banks in January raising their price targets on Howmet to account for the expected growth in sales.
NYSE: HWM
Key Data Points
Is Howmet a buy?
The bull case from here is that both sides of the commercial aerospace market will grow for Howmet in 2025. Boeing is hopeful that it will win regulatory approval to ramp up production as the year goes on, which would provide a spark to Howmet sales. But the increase will not be nearly enough to meet the demand for new jets, allowing Howmet to continue to benefit from the aftermarket, or spare part sales.
There are some areas of concern, including an uncertain post-election defense market. And with Howmet shares already up 120% over the past year valuations and expectations are now sky-high, meaning that any even short-term disruption could cause an oversize reaction to the company's share price.
But Wall Street's optimism seems well founded, and Howmet does appear well positioned to benefit from what should be a multiyear demand surge in the aerospace sector. Investors intrigued by the opportunity should not shy away from Howmet after the stock's move higher.
