HWM

Overall Financial Performance

• Total second quarter 2026 revenue grew 24% year-over-year, with 21% organic revenue growth (excluding M&A impacts), the strongest quarterly growth rate since Q1 2023
• Adjusted EBITDA grew 39% year-over-year (the fastest growth since Q3 2021) to 32.1% margin, up 340 basis points year-over-year, with 46% incremental flow-through of revenue to EBITDA
• Adjusted EPS grew 46% year-over-year to $1.33, exceeding the high end of prior guidance
• Q2 free cash flow was $479 million, bringing first half 2026 total free cash flow to approximately $840 million
• Balance sheet remains strong: net debt to trailing EBITDA was 1.4x post-CAM acquisition, with $1.45 billion in total unused liquidity capacity
• Capital expenditure was $104 million in Q2, with most spending directed to the engine products segment to support aerospace and gas turbine growth, all backed by customer contracts
• $300 million in common stock was repurchased in Q2, bringing first half 2026 total repurchases to $600 million; the quarterly dividend was increased 17% from $0.12 to $0.14 per share

End Market Demand Trends

• Commercial aerospace: 28% total revenue growth (26% organic), driven by strong new build and spares demand; aircraft backlog continues to grow, with build rates expected to increase through 2026, 2027 and beyond; business jet demand also remains strong
• Defense aerospace: 11% total revenue growth (7% organic), supported by healthy spares activity and higher legacy fighter demand; near-term demand for missile programs (PAC-3, THAAD, Tomahawk, and classified programs) is strengthening, with medium-term growth expected for engine systems for large missiles, drones and collaborative combat aircraft
• Industrial Gas Turbines (IGT): 38% revenue growth, driven by rising demand for natural gas-powered electricity generation for data centers; all seven major customer agreements have been completed, with multiple customers already requesting upward demand revisions; Howmet holds >50% global market share for IGT turbine blades
• Commercial Transportation: 12% revenue growth from aluminum cost pass-through, with 8% lower volume year-over-year; volumes rose 7% sequentially, and the 2027 market outlook is increasingly positive
• Total spares revenue across core markets grew 37% to ~$560 million, now representing 22% of total first half 2026 revenue, up from historical levels

M&A and Integration

• The $1.8 billion CAM fastener acquisition was completed on April 6, 2026, and integration is on track; 2027 is the target year for noticeable synergy realization
• The Brunner Fastener acquisition completed in February 2026 drove the 39% growth in the 'other markets' category

• Q3 2026 guidance: Revenue of $2.75 billion ± $10 million, EBITDA of $830 million ± $5 million, adjusted EPS of $1.35 ± $0.01
• Full year 2026 guidance was increased across all metrics: Revenue of $10.05 billion ± $50 million, EBITDA of $3.23 billion ± $20 million, adjusted EPS of $5.27 ± $0.04, free cash flow of $1.9 billion ± $50 million
• Full year 2026 capital expenditure is now expected to exceed $500 million, with a further significant step-up in capital spending planned for 2027 to support IGT and commercial aerospace growth
• Free cash flow conversion target of 90% is maintained for the forecast period
• Howmet expects 2027 revenue to increase over 2026, with initial 2027 guidance expected to be shared at the Q3 2026 earnings call in November

1. Engine Products: Revenue increased 32% year-over-year to $1.37 billion, with 37% growth in commercial aerospace, 17% in defense aerospace, and 38% in gas turbines. EBITDA increased 51% to $517 million, with an EBITDA margin of 37.7% (up 470 basis points year-over-year). This segment contributes 59% of total company revenue.
2. Fastening Systems: Revenue increased 37% year-over-year to $589 million, including the impact of the CAM and Brunner acquisitions; organic growth was double-digits. Commercial aerospace was up 39%, defense aerospace up 45%, and commercial transport was flat. EBITDA increased 40% to $177 million, with an EBITDA margin of 30.1% (up 90 basis points year-over-year). This segment contributes 25% of total company revenue.
3. Engineered Structures: Revenue declined 13% year-over-year to $269 million due to the divestiture of the Savannah Disk Forging Facility; revenue was flat excluding the divestiture impact. EBITDA margin increased 170 basis points to 23.8% driven by ongoing profitability optimization efforts. This segment contributes 12% of total company revenue.
4. Forged Wheels: Revenue increased 14% year-over-year as higher aluminum cost pass-through offset an 8% volume decline. Volumes rose 7% sequentially quarter-over-quarter as the North American market began to recover. EBITDA increased 16% to $88 million, with an EBITDA margin up 30 basis points year-over-year to 32.7%. This segment contributes 4% of total company revenue.

• Ongoing conflict in the Middle East has increased jet fuel and gasoline price volatility and impacted near-term commercial air traffic activity, though Howmet has not seen any changes to customer demand to date
• Higher interest rates have persisted as near-term rate cut expectations have faded, creating a tighter macroeconomic environment
• Higher aluminum prices have created temporary margin dilution in the Forged Wheels segment, which is expected to continue for at least the next two quarters
• The timing and ultimate magnitude of projected commercial aerospace production rate increases remain uncertain, as the entire supply chain must coordinate to support higher output, and weak links in the supply chain could delay growth
• Projected space-based solar power for data centers, a potential long-term alternative to terrestrial gas power generation, faces significant technical, logistical and cost barriers that will likely delay commercial deployment until the 2040s or 2050s, though it remains a long-term uncertainty

Q: How does Howmet's competitive position and existing capacity allow it to support surging IGT demand growth, and what are its technology advantages?

A: Howmet holds over 50% global market share for IGT turbine blades, with multiple ongoing capacity expansion projects (new plant in Japan, major expansion in Europe, U.S. Virginia footprint reconfiguration) already underway. The company is well positioned to gain further market share as the market shifts from equiax to directionally solidified and eventually single crystal blade technology, and its large core blade capability aligns with future industry trends. Management noted space-based power for data centers is not a near-term threat, as it faces massive technical and logistical hurdles that will delay commercial deployment for decades.

Q: What is the timeline for ramping up production to meet newly signed IGT demand contracts?

A: Capacity already committed from prior investments will progressively come online through 2026 and 2027, with the new Japanese plant already nearly fully allocated. Major capacity expansions for newly announced demand will not come online until 2028 to 2030. Howmet has already pre-booked machine tool supplier capacity to be able to respond quickly to further customer demand revisions as they firm up.

Q: What is the progress of Howmet's multi-chemistry coating transition for engine products, and what is the growth scope for this capability?

A: Howmet has expanded coating capacity over the past several years and now has facilities capable of applying multiple coating chemistries in a single run, for both internal and external blade surfaces. The company is currently evaluating whether to further expand its coating plant footprint, and is already procuring long lead-time advanced equipment to prepare for future growth, as demand for this higher-value capability rises alongside commercial aircraft production increases.

Q: What is the timeline for synergy realization from the recent CAM acquisition?

A: The first three months have focused on IT system upgrades, cybersecurity improvements, employee program harmonization, and asset base assessment. All original synergy assumptions remain on track, with small operating synergies expected to begin appearing in the second half of 2026. The majority of synergy benefits will be realized in 2027, with distribution optimization programs also ramping up next year. The acquisition is expected to be roughly break-even for 2026 in EPS terms, with positive accretion starting in 2027.

Q: What is Howmet's approach to future M&A and capital deployment?

A: Howmet has completed two acquisitions in 2026 that expanded its business, while still delivering dividend growth and share buybacks. Management expects share repurchases will likely be higher in 2027 than in 2026, and the company is open to further high-quality bolt-on M&A opportunities that deliver synergy benefits. No large mega-acquisitions are currently under consideration, and the company will continue its strategy of sustainable high-margin growth.