The United States and China just agreed to slash reciprocal tariffs for 90 days while they negotiate a longer-term solution to their trade disputes.
This is great news for Howmet Aerospace (NYSE:HWM). This is a key supplier of critical metal components to the $150 billion jetliner industry. Just last month, Howmet made headlines when it declared a force majeure event, where it said it might halt shipments if impacted by President Trump's proposed tariffs. With this temporary trade deal now in place, Howmet's outlook has improved.
Earlier, it reported solid Q1 2025 results and growth trajectory.
Under the terms announced today, American tariffs on Chinese imports will drop from 145% to 30% for an initial period of 90 days. Chinese tariffs on U.S. goods will fall from 125% to 10%.
Howmet supplies metal components to both Airbus and Boeing, and CEO John Plant had previously said that Chinese carriers were pushing back against taking higher-priced Boeing aircraft due to the trade situation. With tariffs temporarily reduced, these pressures should ease and lead to a boost.
Management recently raised full-year guidance despite the tariff uncertainties that existed when they reported on May 1. The updated outlook projects adjusted profit per share between $3.36 and $3.44, up from the previous forecast of $3.13 to $3.21. With the recent tariff update, this could be raised even higher.
The company is already benefiting from a major fire at rival SPS Technologies' factory near Philadelphia in February, which disrupted the fastener supply chain. CEO Plant noted that Howmet has been booking $20-30 million in additional orders as a result, with "hundreds of parts yet to quote".
I believe this is a short-term buy if you like momentum plays. I wouldn’t buy this as a long-term play since you’re paying 51 times earnings vs. the historical median at 37 times. You’re also paying 45 times forward earnings, and that’s despite EPS growth being expected to decline from 30% this year to 17% next year.
The average price target at $164.5 implies very little upside from the current price of $157.4.
