Wall Street Bulls Look Optimistic About Howmet (HWM): Should You Buy?

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on Howmet (HWM), and emphasizes the importance of using these recommendations in conjunction with other research tools like the Zacks Rank [1][4]. Group 1: Brokerage Recommendations for Howmet - Howmet has an average brokerage recommendation (ABR) of 1.43, indicating a consensus between Strong Buy and Buy, based on 21 brokerage firms [2]. - Out of the 21 recommendations, 17 are Strong Buy and 1 is Buy, which accounts for 81% and 4.8% of all recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations may not be advisable, as studies show they often fail to guide investors towards stocks with the highest potential for price appreciation [4]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings due to vested interests, with five "Strong Buy" recommendations for every "Strong Sell" [5][9]. Group 3: Zacks Rank as a Reliable Indicator - The Zacks Rank, which classifies stocks from 1 (Strong Buy) to 5 (Strong Sell), is presented as a more reliable indicator of near-term price performance, driven by earnings estimate revisions [7][10]. - The Zacks Rank is updated more frequently than the ABR, reflecting timely changes in analysts' earnings estimates, making it a better tool for predicting future price movements [11]. Group 4: Current Earnings Estimates for Howmet - The Zacks Consensus Estimate for Howmet has increased by 3% over the past month to $3.23, indicating growing optimism among analysts regarding the company's earnings prospects [12]. - This increase in consensus estimates has contributed to a Zacks Rank of 2 (Buy) for Howmet, suggesting that the Buy-equivalent ABR may serve as a useful guide for investors [13].