Hexcel Remains Tethered to Aircraft Production Rates

Hexcel is one of the three major manufacturers of composite materials (primarily carbon fiber and resin) for the aerospace and defense industry. Composites as a percentage of aircraft weight have increased with each generation of aircraft development as composites are frequently lighter than traditional metals, which allows airlines to save on fuel expense, and are as strong as needed for aerospace purposes. We think this trend will continue playing out over the next few decades, as aircraft development and replacement is a slow process and several important aircraft types, notably narrow-bodies, have low composite penetration, so we view Hexcel as a long-term growth story within aerospace. As composite penetration has progressed further in wide-bodies than narrow-bodies, Hexcel’s revenue and operating income are more heavily weighted toward wide-bodies than narrow-bodies.