Howmet vs. General Dynamics: Which Aerospace & Defense Stock Should You Bet On?

Globe and Mail

18-07-2025

Howmet Aerospace Inc. HWM and General Dynamics Corporation GD are two prominent names operating in the aerospace and defense industry. As rivals, both companies are engaged in producing highly engineered aircraft components for commercial and military aircraft in the United States and internationally.
Both companies have been enjoying significant growth opportunities in the aerospace and defense space on account of the improving air traffic trend and the expansionary U.S. budgetary policy in the past couple of years. But which one is a better investment today? Let's take a closer look at their fundamentals, growth prospects and challenges to make an informed choice.
The Case for Howmet
The strongest driver of Howmet's business at the moment is the commercial aerospace market. Persistent strength in air travel has been driving demand for wide-body aircraft, supporting continued OEM spending. Pickup in air travel has been positive for the company as the increased usage of aircraft spurs spending on parts and products that it provides.
Revenues from the commercial aerospace market increased 9% year over year in first-quarter 2025, constituting 52% of its business. The sustained strength was attributed to new, more fuel-efficient aircraft with reduced carbon emissions and increased spare demand for engines.
While the commercial aerospace market has remained a major driver for the company, the defense side of the industry has also been witnessing positive momentum, cushioned by steady government support. The company has been witnessing robust orders for engine spares for the F-35 program and spares and new builds for legacy fighters.
In the first quarter, revenues from the defense aerospace market increased 19% year over year, constituting 17% of the company's revenues. Improved budgetary provisions from the U.S. government set the stage for Howmet, focused on defense business, to win more contracts, which is likely to boost its top line.
The company also remains committed to increasing shareholder value through dividend payouts and share repurchases. In the first three months of the year, it paid dividends worth $42 million and repurchased shares for $125 million. In January 2025, the company hiked its quarterly dividend by 25% to 10 cents per share. Also, in July 2024, its board approved an increase in the share repurchase program by $2 billion to $2.487 billion of its common stock.
Despite the positives, HWM has been subject to continued weakness in the commercial transportation market over the past few quarters. Demand in the commercial transportation markets served by the Forged Wheels segment is expected to remain soft till the second half of the year due to lower OEM builds.
The Case for General Dynamics
General Dynamics had an impressive backlog of $88.66 billion at the end of the first quarter of 2025, driven by a strong order inflow. The estimated contract value, which combines the total backlog with the potential contract value, totaled $141.33 billion at the end of the quarter. The strength of the order flow was driven by strong demand across the company's product and services portfolio.
Apart from its well-established domestic market, the company enjoys significant overseas opportunities across multiple nations, particularly in Europe, for its Land Systems unit's products. In first-quarter 2025, it witnessed robust demand for its combat system products, with particular strength in Europe.
The U.S. fiscal budgets have played a key catalyst for the growth of General Dynamics' Marine Systems business. Notably, in May 2025, a White House report published that U.S. President Trump proposed an increase in the nation's defense spending (to $1.01 trillion) for fiscal 2026. This should bode well for GD with its strong presence in the defense shipbuilding industry.
However, the global supply-chain disorder plagued by disruptions, delays and shortages has impacted the company. Evidently, within its Aerospace business, supply-chain challenges forced GD to ramp up production in response to strong customer demand for its aircraft and caused out-of-sequence manufacturing. This resulted in increased costs and reduced operational efficiency for General Dynamics in 2024.
General Dynamics' highly leveraged balance sheet also remains concerning. Its long-term debt totaled $7.26 billion exiting first-quarter 2025, while its short-term debt was $2.35 billion. The company's cash and cash equivalents amounted to $1.24 billion, which were lower than both its short-term and long-term debt. Considering its debt profile, GD holds a weak solvency position.
Price Performance
In the past year, Howmet shares have soared 142%, while General Dynamics stock has gained 4.1%.
The Zacks Consensus Estimate for HWM & GD
The Zacks Consensus Estimate for HWM's 2025 sales and earnings per share (EPS) implies year-over-year growth of 8.7% and 29%, respectively. HWM's EPS estimates for both 2025 and 2026 have increased over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GD's 2025 sales and EPS implies year-over-year growth of 5.9% and 9.9%, respectively. GD's EPS estimates have been trending northward over the past 60 days for both 2025 and 2026.
GD's Valuation Attractive Than Howmet
General Dynamics is trading at a forward 12-month price-to-earnings ratio of 18.77X, above its median of 17.48X over the last three years. Howmet's forward earnings multiple sits at 49.21X, much higher than its median of 26.09X over the same time frame.
Image Source: Zacks Investment Research
Final Take
General Dynamics' strength in the aerospace and defense markets has been dented by the continued supply-chain challenges arising from component shortages. The company's solid momentum in domestic and international markets adds to its strength. However, its high debt profile remains a constraint.
In contrast, Howmet's market leadership position and strength in both commercial and defense aerospace markets provide it with a competitive advantage to leverage the long-term demand prospects in the aerospace market. Despite its steeper valuation, HWM holds robust prospects due to strong estimates, stock price appreciation and better prospects for sales and profit growth.
Given these factors, HWM seems to be a better pick for investors than GD currently. While HWM currently carries a Zacks Rank #2 (Buy), GD has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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General Dynamics Corporation (GD): Free Stock Analysis Report
Howmet Aerospace Inc. (HWM): Free Stock Analysis Report