Gas turbine revenue has seen significant growth, up 32% in the fourth quarter and 25% for the full year. This growth is driven by increased demand for electricity generation, especially from natural gas for data centers. Spares revenue has also increased, representing 21% of total revenue in 2025.
In 2025, Howmet saw record revenue, EBITDA, EBITDA margin, and earnings per share. Revenue increased by 11% year-over-year, while EBITDA grew by 26%. The balance sheet strengthened, with a record free cash flow of $1.43 billion. Debt was reduced by $265 million, with all long-term debt at fixed rates.
Howmet’s capital deployment in 2025 included a record $453 million in CapEx and approximately $1.2 billion in cash for stock repurchases, debt paydown, and dividends. Approximately 70% of CapEx was in the Engines business, with investments backed by customer contracts. The average diluted share count improved to 404 million shares.
The Engine Products segment delivered record revenue, EBITDA, and EBITDA margin in the fourth quarter. Quarterly revenue increased by 20% to $1.16 billion, with commercial aerospace up 17% and defense aerospace up 18%. EBITDA outpaced revenue growth, increasing by 31% to $396 million.
Fastening Systems also had a strong quarter, with revenue increasing by 13% to $454 million. EBITDA outpaced revenue growth, increasing by 25% to $139 million. The EBITDA margin increased by 290 basis points to 30.6%, driven by commercial and operational performance. For the full year, revenue was up 11% to $1.75 billion. In the latest financial report, EBITDA increased by 31% to $530 million with an EBITDA margin of 30.4%, up by 460 basis points. The fasteners team saw solid revenue and EBITDA growth, while Engineered Structures quarterly revenue increased by 4% to $287 million.
The Forged Wheels segment reported a 9% increase in quarterly revenue, offsetting a 10% decrease in volumes with higher aluminum costs and favorable foreign currency impacts. EBITDA was $79 million, a 20% increase, with a margin of 29.9%, up by 270 basis points despite market challenges.
Despite a challenging market, the Wheels team saw a 3% increase in EBITDA to $296 million, with a strong margin of 28.5%, up by 130 basis points. The company announced a dividend policy of 15% of adjusted net income for 2025, with cash dividends totaling approximately $181 million.
The company completed the annuitization of the U.K. pension plan in the fourth quarter of 2025, resulting in a $128 million reduction in pension obligations. No new contributions were required for the transaction, and future annuity payments will be handled by a third-party carrier.
Looking ahead, the company expects growth in markets such as commercial aerospace, defense, and gas turbines. With a strong backlog in commercial aircraft builds and increasing demand for gas turbines, Howmet is well-positioned for future growth and expansion in key market segments. Commercial transportation revenue for the year is down 5%, but market stabilization is predicted with new emissions regulations driving demand in the second half of 2026. Q1 2026 guidance numbers include revenue of $2.235 billion and EBITDA of $685 million.
Aircraft build rate assumptions for Boeing and Airbus are noted, with Q1 revenue up 15% year-on-year above the 2025 average. Guidance for 2026, excluding the acquisition of CAM, includes revenue of $9.1 billion and EBITDA of $2.76 billion.
Howmet has made significant acquisitions in the fastener business, enhancing product offerings. A $1.8 billion acquisition in Aerospace fasteners and fittings strengthens the company’s portfolio for growth in 2027, with a focus on capital allocation to growing businesses.
CEO John Plant discusses the evolving growth outlook across commercial aerospace, defense, and gas turbines. Commercial aerospace backlog is strong, with investments made to meet increased build rates. Solid demand for defense, including legacy aircraft orders, is also noted.
Investor questions to CEO John Plant focus on the company’s growth strategy and high EBITDA margins. Plant emphasizes the robust growth outlook for commercial aerospace and the need for increased build rates to meet demand. Strong demand for defense products, including legacy aircraft, is also highlighted. The F-35 program remains a key focus, but significant demand is emerging in missile segments. Investments are backing defense sectors, particularly gas turbines, which have shown more consistency and demand for renewable and fossil fuel support. Capital deployments are increasing for data centers and AI advancements, with plans for higher investments in 2027.
Capital expenditure rose significantly above projections for 2025, with plans for further increase in 2026. Investments in new manufacturing plants are expected to come online in 2026 and 2027. Discussions with customers indicate the need for additional investments, with potential for even higher capital numbers in 2027 for gas turbines and energy output.
Margins at 34% are considered good, with caution on predicting future margins due to various factors. Plans to recruit 1,500 more people in the Engine segment in 2026 will require additional costs and training. The focus remains on investing in areas that yield higher returns, including commercial aerospace, defense, and collaborative combat aircraft opportunities. The company is focused on achieving yield improvements through effective labor and batch production in the gas turbine area. Despite a decline in margins for the year, the company is deploying capital for new equipment, extending manufacturing plants, and making acquisitions to support growth. The company expects a balanced view of their operations, with a cautious approach to margin predictions amid ongoing investments and expansions. The return on invested capital for gas turbines is expected to be similar to that of commercial aerospace and defense sectors, with ongoing discussions with customers impacting capital deployment plans. Total capital spending is projected to increase over the next few years, with a midrange estimate of $470 million for the current year. The company predicts strong cash generation in 2027, potentially exceeding 2026 levels. They emphasize strategic capital deployment, focusing on organic growth, shareholder returns, and M&A opportunities. With a healthy balance sheet, the company plans to continue investing in the business, buying back shares, and pursuing acquisitions like the recent aerospace manufacturing deal.
The company’s CEO does not foresee gas turbine revenue surpassing commercial jet engine revenue. However, they highlight the growth in both aerospace sectors and the increasing demand for gas turbines. Technological advancements in gas turbines are driving product mix changes, leading to higher content requirements and improved capabilities. The company remains optimistic about future growth opportunities in the aerospace and gas turbine markets. The need for electricity is increasing rapidly for the next decade and beyond. Howmet recently acquired CAM and [Bruner], expanding their product offerings in the fastener market. This move allows them to serve new segments and customers, driving growth and profitability in aerospace and industrial markets.
Howmet’s spares business grew over 30% in 2025, exceeding expectations. Commercial aerospace saw a growth rate of nearly 40%, with spares accounting for 21% of total revenue. This growth trend is expected to continue into 2026, with potential for further expansion in the company’s revenue streams.
Automation has been a significant investment for Howmet, leading to improved efficiency and lower labor costs. By deploying capital in automation technologies, Howmet has reduced the need for additional employees, driving profitability and growth in their engine margins. A new manufacturing plant in Whitehall will utilize digital thread technology to track manufacturing processes and incorporate machine learning and AI. However, due to high capital requirements and engineering bandwidth constraints, full implementation may be delayed until 2027 or later to focus on market growth and customer demand.
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Read more at Yahoo Finance: Howmet HWM Q4 2025 Earnings Call Transcript