A supplier to aerospace and defense giants like Boeing, Airbus and Lockheed Martin, Howmet Aerospace has just landed on the IBD Breakout Stocks Index, joining industry peers TransDigm and Loar.
While Boeing stock got a lift from its April 23 earnings report, Howmet is on tap to report May 1. It's one of a slew of aerospace and defense stocks set to report. Airbus unveils its numbers on Wednesday, followed by TransDigm on May 6, and Loar on May 20.
As Howmet Aerospace teases a breakout, investors should note the risk of buying stocks just ahead of earnings. Investors can reduce that risk by waiting to see how a company reports — and how Wall Street reacts — before initiating a new position.
But here are three reasons to keep an eye on Howmet Aerospace as it taxis up to report earnings and launch a possible breakout.
See All Names On The IBD Breakout Stocks Index
1. Howmet Aerospace In Demand Among Top Funds
Based in Pittsburgh, Howmet is a global provider of advanced engineered solutions for the aerospace, defense and transportation industries. The company primarily focuses on jet engine components, aerospace fastening systems, and airframe structural components. It also makes forged aluminum wheels for commercial transportation.
While Howmet did not make the list of the latest monthly list of new buys by the best mutual funds. it did land a spot on the March screen, with institutional investors scooping up an estimated $100.1 million worth of Howmet stock. Plus, 143 funds with an A+ rating from IBD currently own shares. In another indicator of demand, Howmet stock has seen eight quarters of rising fund ownership.
Over the last eight quarters, Howmet Aerospace has delivered earnings growth ranging from 26% to 54%. In the fourth quarter, Howmet posted a 40% year-over-year gain to 74 cents per share. Analysts forecast a 36% gain to 78 cents a share for the first quarter. For the full year, Wall Street expects 21% earnings growth to $3.27 per share.
After seven quarters of double-digit sales growth, revenue slipped to a 9% gain to just under $1.9 billion in the fourth quarter. Analysts expect 6% sales growth to $1.94 billion for the first quarter.
Howmet ranks among the top aerospace and defense stocks, sporting a strong 98 Composite Rating. The group ranks No. 6 out of the 197 industries Investor's Business Daily tracks.
2. Soaring Relative Strength Line
In a sign of clear market leadership, the relative strength line for Howmet Aerospace recently notched a 52-week high.
The RS lines for peers TransDigm and Loar are also at or near their 52-week highs. While the relative strength line for Boeing remains in recovery mode, it has turned sharply higher since the aerospace giant reported earnings and said it reached a deal to sell part of its navigation business for around $10.6 billion.
Risk Management: How Invested In The Market Should You Be Right Now?
3. Howmet Stock Resets Base Count For Potential Launch
As earnings loom, Howmet Aerospace continues to close in on a 138.06 buy point in a double bottom. It's a first-stage base since the stock reset its base count earlier this month by undercutting the low in its prior pattern. That's a positive since early-stage bases have a higher likelihood of success. But the chances of a sustainable climb hinge on Howmet's upcoming report.
Investors should also keep an eye on the 21-day exponential moving average. To show improving technical strength, see if that line can climb back above the longer-term 50-day benchmark.
Fighting off an early sell-off on the Nasdaq on Wednesday, Howmet bounced back to close just above the buy point.
As Howmet Aerospace sets up, Boeing stock teases a 184.40 entry, also in a double-bottom pattern. Fellow defense stocks and IBD Breakout Stocks Index members TransDigm and Loar are also in focus.
Featured on April 21, Loar trades right around the top of its buy range after breaking out from a cup with handle pattern last week. Meanwhile, TransDigm closed Wednesday's session just 1% shy of a 1,424.68 entry in a third-stage consolidation.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities Exchange Traded Fund from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows investment in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
