Company Reports

Hexcel is one of the three major manufacturers of advanced carbon fiber and resin composite materials for the aerospace and defense industry, though it supplies other industrial markets as well. Composites as a percentage of aircraft weight have increased with each generation of aircraft development as they are strong and durable enough for aerospace purposes but generally lighter and stronger than the metals they replace, which allows airlines to save on fuel expense when operating a lighter plane. We think this trend will likely persist over the next decade or longer, as aircraft development and replacement is a slow-moving process and several important aircraft types, notably narrow-bodies, still have low composite penetration. Hexcel's strategy is to provide composite materials to build successive generations of aircraft within the very consolidated aerospace and defense industry. The company has, over the years, expanded into multiple verticals, experienced downturns, and subsequently rationalized its product lines away from leisure and other undifferentiated applications.

Narrow-moat Hexcel's second-quarter results in aerospace and defense markets came in close to our expectations. Still, its sales to other industries declined 25% in the first half, continuing years of declines in markets like windmills and automobiles. The company slightly trimmed its 2024 expectations of aerospace deliveries, driven by customers Airbus and Boeing, who are not accelerating their production pace as much this year as initially planned. We have lowered our fair value estimate by $3 to $61 mainly because we forecast continued declines in the industrials markets for the next decade.

Hexcel is one of the three major manufacturers of advanced composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. Composites as a percentage of aircraft weight have increased with each generation of aircraft development as they are strong and durable enough for aerospace purposes but generally lighter than metal, which allows airlines to save on fuel expense when operating a lighter plane. We think this trend will likely persist over the next decade or longer, as aircraft development and replacement is a slow-moving process and several important aircraft types, notably narrow-bodies, still have low composite penetration. Hexcel's strategy is to provide composite materials to build successive generations of aircraft within the very consolidated aerospace and defense industry. The company has, over the years, expanded into multiple verticals, experienced downturns, and subsequently rationalized its product lines away from leisure and other undifferentiated applications.

With first-quarter 2024 results in hand, we have increased our fair value estimate for narrow-moat aerospace supplier Hexcel by $1 to $64 per share, primarily due to the time value of money.

We aren't adjusting our moat rating or forecasts as a result of narrow-moat Hexcel's replacement of Nick Stanage as president and CEO by Thomas Gentile, effective May 1, 2024. Stanage is set to continue as chairman until his retirement at the end of the year. From 2016 until he was replaced by a member of the board and former Boeing executive Pat Shanahan in October of 2023, Gentile served as president and CEO of Spirit AeroSystems.

We reaffirm our $63 fair value estimate for narrow-moat Hexcel after incorporating the firm’s full 2023 results and management's near-term expectations into our forecast.

Incorporating narrow-moat Hexcel's third-quarter results into our forecast, we reaffirm our $63 fair value estimate.

We are picking up coverage of Hexcel Corporation with a narrow economic moat rating and $63 per share fair value estimate, making the shares fully valued at recent prices. Half of Hexcel's revenue comes from providing carbon fiber composites to Boeing and Airbus as parts for their range of jets. It shares the market with Solvay and Toray, though Hexcel is more heavily specialized in aerospace, which confers its competitive advantage because switching costs are higher in aerospace than other industries.

Hexcel is one of the three major manufacturers of advanced composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. Composites as a percentage of aircraft weight have increased with each generation of aircraft development as they are strong and durable enough for aerospace purposes but generally lighter than metal, which allows airlines to save on fuel expense when operating a lighter plane. We think this trend will likely persist over the next decade or longer, as aircraft development and replacement is a slow-moving process and several important aircraft types, notably narrow-bodies, still have low composite penetration. Hexcel's strategy is to provide composite materials to build successive generations of aircraft within the very consolidated aerospace and defense industry. The company has, over the years, expanded into multiple verticals, experienced downturns, and subsequently rationalized its product lines away from leisure and other undifferentiated applications.

We are dropping coverage of Hexcel. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Narrow-moat-rated Hexcel, a supplier of advanced composite materials, posted improved sales and margins as the firm re-ramps production to meet rebounding new plane demand. Second-quarter sales of $393 million and adjusted earnings per share of $0.33 beat FactSet expectations by 1.0% and 10.0%, respectively. We are increasing our fair value estimate for Hexcel to $57 per share from $56 due to the time value of money.

Hexcel is one of the three major manufacturers of composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. 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 skewed toward wide-bodies than narrow-bodies.

Narrow-moat-rated Hexcel reported strong sales growth as aerospace equipment suppliers have adjusted to new production rates and as aircraft manufacturers ramp up production. Sales of $391 million and earnings per share of $0.22 per share beat FactSet consensus by 4.9% and 41.8%, respectively. After adjusting our model for first quarter results and including an updated aviation demand forecast, we are increasing our fair value for Hexcel to $56 per share from $49.50.

Hexcel is one of the three major producers of composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. 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 skewed toward wide-bodies than narrow-bodies.

Narrow-moat-rated Hexcel reported a solid fourth quarter as narrowbody production increases to serve domestic travel demand. Hexcel remains more exposed to widebodies, particularly the Airbus A350, and widebody demand for passenger aircraft remains depressed. Sales of $360 million and earnings per share of $0.16 beat FactSet consensus by 0.2% and 28.9%, respectively.

Hexcel is one of the three major manufacturers of composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. 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 skewed toward wide-bodies than narrow-bodies.

Hexcel is one of the three major manufacturers of composite materials (primarily carbon fiber and resin) for the aerospace and defense industry, though it supplies other industrial markets as well. 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.

Narrow-moat Hexcel returned to growth in the third quarter as the firm laps an easy comparable quarter in 2020, and the supply chain destocking has largely completed on most major aircraft programs. Sales of $334 million were shy of FactSet consensus by 4.0%, but EPS of $0.13 beat consensus by 59.6%. We are increasing our fair value to $49.50 from $48 as we reduce our capital expenditures forecast to account for several years of low capital reinvestment requirements due to the general fungibility of aerospace-grade carbon fiber between narrowbody and widebody aircraft, though this was partially offset by a slightly lower revenue forecast.

Narrow-moat-rated Hexcel reported a solid second quarter as the inventory destock begins to complete its whiplash throughout the aviation supply chain. Sales of $320.3 million missed FactSet Consensus by 1.1%, but earnings per share of $0.08 beat FactSet consensus of $0.01.

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.