Howmet Aerospace (HWM)
Howmet's spares mix is climbing, ~21% and +44% YoY, feeding engine OEMs and MRO shops; Engine Products runs a 33.3% Adj. EBITDA margin on $1.4B FCF.
Educational analysis for professional use. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
Business Overview
Howmet sits between engine OEMs and sole-source parts suppliers, selling proprietary engine components and structures into both original equipment, OE, production and the spares channel. The mix leans OE-heavy, but spares' share of revenue moved from about 17% to about 21% in FY2025 as commercial engine spares grew 44%. Engine Products, the OE-plus-spares blend, ran at a 33.3% adjusted EBITDA margin. Market capitalisation on 9 June 2026 was roughly $103.1B (400.9M shares at $257.16).
Howmet is OE-heavy relative to TransDigm (31.8% commercial aftermarket) or GE Aerospace (71% services). The OEM vs aftermarket guide uses Howmet's ~21% spares share to show how a component supplier monetises the installed base without running a maintenance, repair and overhaul (MRO) business itself.
Howmet does not quantify backlog in units or dollars; filings describe only a "record OEM backlog stretching into the next decade." It does not disclose book-to-bill, the ratio of new orders to revenue billed, either. The installed-base guide tracks Howmet's spares growth rate instead, as the aftermarket read-through when neither backlog metric is available.
How the Numbers Read
Free cash flow was $1.4B in FY2025 (operating cash flow $1.884B less capex $453M), a computed conversion of roughly 59% against $2.4B adjusted EBITDA. Net debt was $2.3B ($3.05B debt less $743M cash). The valuation guide sets out how to size an EV/EBITDA multiple for a proprietary-parts supplier once the EBITDA basis is matched to the filer.
Engine Products' 33.3% margin is an adjusted EBITDA margin. GE's Commercial Engines and Services (CES) segment runs at 26.6% and Safran's Propulsion division at 23.0%, but both of those are operating margins, so part of the gap simply reflects the depreciation and amortisation charge sitting below EBITDA on an operating-margin basis. Howmet's own segment figure also blends OE components with spares, and none of the three filers isolates a clean aftermarket-only margin, so treat the comparison as directional rather than exact.
Valuation Framework
Howmet's economics show how a proprietary-content supplier's margin can move with its channel mix. Spares share moved from ~17% to ~21% in FY2025 on 44% growth in commercial engine spares, and Engine Products margin ran to 33.3% blended across OE and spares. Spares carry a higher margin than OE production, so the blended margin rises as spares take a larger share of revenue, and falls back if a narrowbody production pause slows OE volume before spares growth can offset it.
Howmet does not quantify a backlog, so spares growth and the Engine Products margin trend stand in as the demand read where a filed backlog would normally sit.
What to Watch in the Financials
Spares revenue share. ~21% in FY2025, up from ~17% the year before. This is the line to watch: installed-base economics only show up in the profit and loss account once spares consistently outgrow OE components.
Commercial engine spares growth. +44% YoY in FY2025, a leading read on shop activity for GE/CFM narrowbodies.
Engine Products adjusted EBITDA margin. The blended 33.3% is the number Howmet reports for the whole division. Whether OE volume leverage on forgings and structures holds against input-cost pressure as production scales will decide which way it moves next.
FCF conversion. FCF of $1.4B on $2.4B of adjusted EBITDA is a conversion of roughly 59%, funding capex and continued investment in Howmet's sole-source component positions. That pool is smaller in absolute terms than GE's $7.7B.
Key Risks
OE-heavy mix. ~79% of revenue is not spares. A narrowbody production pause at Boeing or Airbus hits Howmet before the installed-base spares leg can compensate.
Margin sensitivity to spares mix. Engine Products' 33.3% margin depends on spares continuing to outgrow OE. A slowdown in commercial engine spares growth back toward flat, without an offsetting OE recovery, would pull the blended margin down.
No quantified backlog. Qualitative OEM backlog only. Visibility rests on airframer rate guidance and engine build schedules, not a filed dollar backlog.
Customer concentration on engine programmes. Revenue ties to CFM/LEAP and other engine platforms shared across GE and Safran. Programme delays cascade into component orders.
Commercial Aerospace Sector Primer
Delivery rates and the aftermarket annuity are the inputs. This primer takes them to a dual-rate sum-of-the-parts and an EV/EBITDA you can defend.
The Excel model is the primer's two dual-rate sum-of-the-parts builds live across 12 sheets: original equipment capitalised at a cyclical rate, the installed-base aftermarket at a lower annuity rate, summed to enterprise value. Change the delivery rate, the aftermarket dollars per unit or either discount rate and the value per share moves.