For investors seeking stability and the potential for consistent performance in their portfolios, Howmet Aerospace (HWM 2.90%) is an intriguing option. Shares of Howmet more than doubled in 2024, and the aerospace component manufacturer is well-positioned to continue to fly higher from here.
1 reason Howmet Aerospace can be a stock to buy and hold forever
Howmet makes fasteners and other highly engineered products for industrial customers including Boeing and Airbus. Newer, more fuel-efficient aircraft are in high demand, and Howmet's low-weight products are a key part of their design.
Spare part sales are a big part of the business, and tend to be more profitable than sales to airplane manufacturers who buy in bulk. Boeing's difficulties in ramping up production have caused airlines to lean on their existing fleets, leading to strong demand for replacement parts needed to keep those older aircraft flying.
NYSE: HWM
Key Data Points
It all adds up to strong results. In 2024, Howmet grew revenue 12% year over year and generated nearly $1 billion in free cash flow. The strong cash generation has allowed CEO John Plant to maintain a healthy balance sheet and reward shareholders. In 2024, Howmet deployed $975 million for stock repurchases, dividends, and debt reduction.
Howmet also continues to invest in research and development toward creating new lightweight materials and refining its manufacturing process. The company also sells into energy-generation markets including parts for gas turbines, and should benefit from the uptick in demand for energy to power artificial intelligence (AI) data centers.
Know before you buy
The aerospace industry is historically cyclical. Fewer people go on vacation or business trips when times are tough, meaning airlines need fewer aircraft. Demand for parts has soared since the pandemic eased, but that is unlikely to last forever.
Howmet also faces challenges such as supply chain disruptions and fluctuations in production rates. But with a strong management team and a long history of operating through cycles, Howmet is well-positioned to navigate through potential headwinds.
Howmet is unlikely to double in value every year. But for those looking for long-term stability and ballast in the portfolio, Howmet Aerospace could be a buy-and-hold-forever stock.
