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Key Takeaways
- Bernstein analysts dismiss concerns about SpaceX manufacturing its own turbine blades, viewing it as minimal risk to Howmet Aerospace (HWM)
- Howmet dominates the industrial gas turbine blade castings sector with more than 50% market share
- Existing long-term contracts with all leading turbine manufacturers extend through approximately 2030
- Second quarter results showed EPS of $1.33 and revenue reaching $2.55 billion, surpassing analyst projections
- The firm maintains an Outperform rating with a $328 price objective for HWM shares
Shares of Howmet Aerospace retreated following Elon Musk’s revelation that SpaceX intends to produce industrial gas turbine blades and vanes internally. However, Bernstein’s research team views this selloff as an attractive entry point rather than cause for concern.
HWM shares began Friday trading at $259.61, significantly beneath Bernstein’s $328 valuation target, suggesting approximately 24% potential appreciation from the August 28 close of $264.85.
The aerospace company aims to deploy 20 gigawatts of behind-the-meter power infrastructure by late 2027 to support AI data center operations in Bastrop, Texas. Achieving this objective requires vertical integration of turbine blade manufacturing.
Musk has repeatedly identified supplier concentration as a critical constraint for the sector. Howmet represents that constraint, commanding over half of the industrial gas turbine blade castings market globally.
Yet Bernstein’s team contends that SpaceX’s decision to pursue internal production reflects market tightness rather than vulnerabilities in Howmet’s competitive positioning.
The company maintains extensive supply contracts with every significant industrial gas turbine manufacturer. These agreements reportedly extend through approximately 2030, aligning with Musk’s own acknowledgment that turbine blade inventory is essentially depleted through that timeframe.
Additionally, SpaceX’s manufacturing initiative appears oriented toward satisfying internal demand rather than challenging Howmet’s dominance throughout the broader marketplace.
Significant technical obstacles exist as well. Achieving turbine blade production at commercial scale presents substantial challenges, and SpaceX may encounter difficulties reaching volume output within its targeted 18-month timeline.
Robust Financial Performance Supports Bullish Outlook
Howmet’s initial capacity expansion facility became operational during Q2, with a minimum of six additional expansion initiatives underway. Industrial gas turbine operations posted 38% growth throughout the period.
Second quarter earnings per share reached $1.33, exceeding the consensus forecast of $1.24. Revenue totaled $2.55 billion versus analyst expectations of $2.43 billion, representing 24.1% year-over-year growth.
Management issued Q3 2026 EPS guidance ranging from $1.34 to $1.36, with full-year 2026 projections between $5.23 and $5.31.
Wall Street Sentiment and Ownership Structure
The Street maintains a predominantly positive outlook. The consensus recommendation stands at Moderate Buy, accompanied by a mean price target of $316.22. JPMorgan elevated its objective to $350, Morgan Stanley holds a $335 target, and Susquehanna boosted its projection to $340.
Institutional shareholders control 90.46% of outstanding shares. NEOS Investment Management expanded its position by 13.1% during Q2, elevating its holdings to approximately $17.44 million in value.
The company also enhanced its quarterly dividend from $0.12 to $0.14 per share, distributed August 25. The annualized payout totals $0.56, representing a 0.2% yield.
Shares currently trade within a 52-week band of $173.38 to $310.00, with the 50-day moving average positioned at $275.44.
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