Key Takeaways
- Bernstein analysts view SpaceX’s turbine blade production plans as minimal risk to Howmet Aerospace (HWM)
- Howmet commands more than half of the global industrial gas turbine blade castings sector
- Existing long-term contracts with major turbine manufacturers extend through approximately 2030
- Q2 results showed EPS of $1.33 and revenue reaching $2.55 billion, surpassing Wall Street forecasts
- Bernstein maintains Outperform rating with $328 price objective for HWM
Shares of Howmet Aerospace experienced a decline following Elon Musk’s revelation that SpaceX intends to develop in-house production capabilities for industrial gas turbine blades and vanes. However, Bernstein’s research team views this market reaction as an attractive entry point rather than a red flag.
Trading commenced at $259.61 on Friday for HWM, significantly beneath Bernstein’s $328 valuation target, representing potential gains of approximately 24% from the August 28 settlement price of $264.85.
The SpaceX initiative centers on establishing 20 gigawatts of behind-the-meter electricity generation capacity by late 2027 to power artificial intelligence data centers in Bastrop, Texas. Achieving this ambitious goal requires vertically integrating turbine blade manufacturing operations.
Musk has consistently identified supplier concentration as a critical constraint within the sector. Howmet represents that constraint, commanding over half of the worldwide market for industrial gas turbine blade castings.
Yet Bernstein’s research team contends that SpaceX’s decision to pursue self-sufficiency reflects the market’s extreme tightness rather than vulnerabilities in Howmet’s competitive moat.
The aerospace manufacturer maintains long-duration supply contracts with all principal industrial gas turbine producers globally. These agreements reportedly extend through approximately 2030, aligning with Musk’s own acknowledgment that turbine blades are essentially allocated through that timeframe.
Furthermore, SpaceX’s production endeavor appears primarily oriented toward satisfying its own requirements rather than challenging Howmet’s broader market position.
Significant technical obstacles exist as well. Achieving mass production of turbine blades demands sophisticated capabilities, and SpaceX faces an uphill battle reaching commercial-scale output within its compressed 18-month timeline.
Solid Operating Performance Supports Bullish Thesis
Howmet’s initial capacity expansion facility became operational during the second quarter, with a minimum of six additional expansion projects currently underway. The industrial gas turbine segment registered 38% growth throughout the period.
Second-quarter earnings per share reached $1.33, exceeding the Wall Street consensus of $1.24. Total revenue hit $2.55 billion versus analyst projections of $2.43 billion, marking a 24.1% year-over-year increase.
Management established third-quarter 2026 EPS guidance ranging from $1.34 to $1.36, while full-year 2026 projections span $5.23 to $5.31.
Wall Street Sentiment and Institutional Holdings
The analyst community leans predominantly positive. The consensus recommendation stands at Moderate Buy, accompanied by a mean price objective of $316.22. JPMorgan elevated its target to $350, Morgan Stanley maintains a $335 forecast, and Susquehanna boosted its projection to $340.
Institutional ownership represents 90.46% of outstanding shares. NEOS Investment Management expanded its position by 13.1% during the second quarter, elevating its holdings to approximately $17.44 million in market value.
The company also enhanced its quarterly dividend distribution from $0.12 to $0.14 per share, disbursed August 25. The annualized dividend totals $0.56, producing a yield of 0.2%.
Shares have traded within a 52-week band of $173.38 to $310.00, while the 50-day moving average registers at $275.44.
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