What Does Howmet Aerospace Do?
Howmet Aerospace Inc. (NYSE: HWM) is a leading manufacturer of advanced engineered components for the aerospace and defense industries. The company was spun off from Arconic in 2020 and has its roots in the original Alcoa aluminum company.
Howmet produces highly engineered, technically complex components including:
- Engine Products: Nickel-based superalloy turbine blades, vanes, and other components for commercial and military jet engines (GE, Pratt & Whitney, Rolls-Royce are key customers)
- Fastening Systems: Aerospace-grade fasteners, bolts, and structural fasteners for commercial aircraft (Boeing, Airbus) and defense platforms
- Engineered Structures: Titanium and aluminum structural components for commercial aircraft and military platforms
- Forged Wheels: Commercial truck wheels (the only clearly non-aerospace segment)
Howmet generates approximately $7 billion in annual revenue. The company's components are found in virtually every major commercial jetliner and many military aircraft, ships, and vehicles.
Commercial vs. Defense: The Revenue Split
Understanding Howmet's revenue split between commercial aerospace and defense is critical for Islamic finance analysis:
- Commercial aerospace: ~55-60% of revenue (engines for Boeing 737/787, Airbus A320/A350, etc.)
- Defense aerospace: ~35-40% of revenue (F-35, F-16, military helicopters, submarine propulsion)
- Commercial transportation: ~5% (truck wheels)
The significant defense revenue — approximately one-third of total sales — is the primary Islamic finance concern for Howmet stock. This is not incidental defense exposure; Howmet is a meaningful supplier to major defense programs including the F-35 Joint Strike Fighter.
The Islamic Debate on Defense Investments
Whether it is permissible to invest in defense companies is one of the most nuanced debates in Islamic finance. Scholars hold genuinely different views:
Position 1: Defense Manufacturing Is Permissible
Islamic jurisprudence recognizes the legitimacy of national defense. The Quran commands Muslims to "prepare against them whatever you are able of power and of steeds of war by which you may terrify the enemy of Allah and your enemy" (8:60). Some scholars extend this to modern defense manufacturing:
- Maintaining defensive capability is a legitimate governmental function
- Manufacturing components for aircraft or weapons is not inherently more prohibited than other industrial activities
- The moral responsibility lies with those who deploy weapons, not those who build components
Position 2: Defense Manufacturing Raises Concerns
Other scholars are cautious about defense investments:
- Modern weapons (especially precision-guided munitions, fighter jets) are primarily designed to kill — facilitating killing, even of combatants, requires strong justification
- Defense companies supply weapons used in conflicts that many Muslim scholars consider unjust
- The income from weapons manufacturing may be considered problematic (makruh or worse)
- Most Islamic screening indexes (AAOIFI, MSCI Islamic) exclude companies with significant defense revenue
How Do Islamic Indexes Treat Defense?
Major Islamic screening standards treat defense manufacturing as follows:
- AAOIFI: Excludes companies involved in weapons manufacturing
- Dow Jones Islamic Market Index: Excludes defense/weapons as a prohibited business activity
- MSCI Islamic Index: Excludes companies with weapons manufacturing revenue
- S&P Islamic Index: Similar exclusion for weapons manufacturing
- FTSE Shariah: Excludes weapons, including conventional weapons manufacturing
Across all major Islamic indexes, defense/weapons manufacturing is classified as a prohibited business activity — meaning companies with significant defense revenue are excluded regardless of their other financial characteristics.
Howmet's Specific Defense Products
To understand the severity of the defense exposure, it helps to know what Howmet specifically makes for defense:
- Turbine blades for F-35, F-16, and F/A-18 fighter jet engines
- Structural components for military helicopters (Black Hawk, Chinook)
- Propulsion components for submarines and naval vessels
- Fasteners for military aircraft structures
These are not generic industrial components that happen to be used in defense — they are components specifically designed and certified for military platforms whose primary purpose is combat.
Financial Analysis
Howmet's balance sheet as of 2024:
- Total debt: ~$4.5-5 billion
- Market capitalization: ~$35-40 billion
- Debt-to-market-cap: approximately 12-14%
- Free cash flow: ~$1.2-1.5 billion annually
- Interest coverage: 8-10x
Howmet passes Islamic debt screening easily. The financial profile is not the concern — the business activity is.
Sharia Screening Results
| Criterion | Howmet Aerospace | Status |
|---|---|---|
| Commercial aerospace revenue (~60%) | Permissible | ✅ Pass |
| Defense/military revenue (~35-40%) | Weapons manufacturing | ❌ Fail (most scholars) |
| Alcohol/tobacco/gambling | None | ✅ Pass |
| Interest income | Minimal | ✅ Pass |
| Debt-to-market-cap <33% | ~12-14% | ✅ Pass |
| Islamic index inclusion | Excluded from DJIM, MSCI Islamic | ❌ Excluded |
Comparison: Aerospace and Defense Stocks
| Company | Defense % | Halal Status |
|---|---|---|
| Howmet Aerospace (HWM) | ~35-40% | Doubtful ⚠️ |
| Lockheed Martin (LMT) | ~97% | Haram ❌ |
| Raytheon/RTX (RTX) | ~50%+ | Haram ❌ |
| Boeing (BA) | ~40% | Doubtful ⚠️ |
| TransDigm (TDG) | ~35% | Doubtful ⚠️ |
| HEICO Corporation (HEI) | ~30% | Doubtful ⚠️ |
Our Verdict: DOUBTFUL ⚠️
Howmet Aerospace is classified as doubtful for Muslim investors:
- ⚠️ ~35-40% of revenue from defense/military applications (significant, not incidental)
- ⚠️ Specifically manufactures components for combat aircraft and military platforms
- ⚠️ Excluded from all major Islamic screening indexes
- ✅ Majority (~60%) of revenue from commercial aviation (permissible)
- ✅ Passes all financial screening criteria
- ✅ No other prohibited business activities
Whether Howmet is "haram" or "doubtful" depends on your scholarly authority regarding defense:
- Strict view (AAOIFI/DJIM): Excluded — defense manufacturing is prohibited
- Mixed-business view: Doubtful — commercial portion is permissible but defense is concerning
- Lenient view: May permit as components manufacturer at some remove from end use
For Muslim investors who wish to avoid defense exposure (as recommended by all major Islamic indexes), Howmet should be excluded from the halal portfolio.
Halal Alternatives for Aerospace Exposure
- HEICO Corporation (HEI) — Aviation parts distribution (lower defense %, though still present)
- Curtiss-Wright (CW) — Industrial and defense technology (similar concern)
- Woodward (WWD) — Aerospace controls (defense exposure)
- For clean aerospace exposure, consider ETFs focused on commercial aviation recovery
Note: Pure-play commercial aerospace manufacturers are rare in public markets. Most aerospace suppliers have some defense exposure. Airbus and Boeing both have defense segments.
Conclusion
Howmet Aerospace presents the classic tension in aerospace investing: a technically excellent company with strong commercial aviation products — but one-third of its business is making components for military fighter jets and naval vessels. For Muslim investors who follow AAOIFI or major Islamic index standards, Howmet fails the business activity screen on defense manufacturing grounds. Those who take a more lenient view of defense components may classify it as doubtful rather than haram, but most scholars would counsel caution given the specificity of the military applications.