Howmet Q3 2026: Revenue up 29%, margins expand, buyback authorization raised

What happened

Howmet Aerospace reported Q3 2026 revenue of $2.703B, up 29% year-over-year with 25% organic growth. GAAP EPS rose 49% to $1.42 and adjusted EPS jumped 54% to $1.46, while adjusted operating margin expanded 320 bps to 29.1%. Free cash flow grew 33% to $562M and the company repurchased $500M of stock during the quarter, totaling $1.1B year-to-date. The board authorized an additional $5B for share repurchases and increased the dividend by 17% to $0.14 per share. Management raised full-year 2026 guidance and issued initial FY2027 revenue guidance of ~$11.5B, up ~12% year-over-year.

Implication

Q3 results show robust demand and pricing power across aerospace markets, supporting continued margin expansion and cash generation. The accelerated buyback and dividend increase demonstrate management confidence and a shareholder-friendly capital allocation strategy, though repurchases at current high multiples may not offer the same value as lower-priced entry points. The raised FY2026 guidance and FY2027 revenue outlook indicate visible growth, but investors should monitor CAM integration specific metrics and any tariff pass-through timing impact on future margins. While the fundamental execution is strong, the stock's high P/E and EV/EBITDA leave little room for error; any margin deterioration or demand slowdown could cause a sharp re-rating. Overall, the results support an upward bias to the prior base case value of $260, but the lack of a margin of safety suggests maintaining a WAIT rating until a better entry opportunity or further evidence of sustainable high profitability.

Thesis delta

Prior thesis recommended WAIT due to high valuation and integration risks. Q3 2026 results exceeded expectations with strong revenue growth, margin expansion, and cash flow, reducing near-term execution risk. However, valuation remains stretched at >40x EV/EBITDA, so the thesis shifts from cautious WAIT to a more constructive WAIT, with a bias toward upgrading if CAM specifically proves accretive and margins remain stable above 30% in subsequent quarters.