Howmet Aerospace (HWM) Bernstein 42nd Annual Strategic Decisions Conference summary

Current opportunities and challenges

• Commercial aerospace backlogs are high, providing security for future volume growth and improved rates from aircraft manufacturers.

• Defense budgets remain solid, with increased aircraft use driving spares demand over the next 2–3 years.

• Gas turbine business is experiencing significant growth due to data center build-outs and electricity supply needs, with over 50% global market share.

• Short-term opportunities exist in the commercial wheel business for trucks in North America and Europe.

• Efficient capital deployment and maintaining strong cash flow conversion are ongoing challenges amid growth.

Gas turbine and power segment outlook

• Revenues in industrial gas turbines (IGT) rose 39% in Q1, with expectations to double from $1B to $2B in 3–5 years.

• Demand is driven by both original equipment (OE) and spares, with the existing fleet working harder than expected.

• Growth is supported by both large and small/midsize turbine manufacturers, with supply shortages creating new opportunities.

• Expansion into LNG and gas compression markets is increasing demand beyond data centers.

• Investment decisions are cautious, balancing capacity expansion with shareholder returns and structured commercial arrangements.

Aerospace and engine products

• Spares revenue is increasing faster than OE, driven by aircraft build rates, engine replacement cycles, and early-life failures.

• Minimal inventory in both OE and spares chains for Boeing and Airbus, with strong demand for engine parts.

• Generational improvements in engine parts (LEAP-1A, LEAP-1B, GTF Advantage) are underway, with higher production expected in 2027.

• New blade technologies leverage advancements from defense programs like the F-35.

• Competitive threats from insourcing and new entrants are monitored, but high technical barriers remain.