Hexcel (HXL) Up 2.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Hexcel (HXL). Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hexcel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hexcel Q2 Earnings Beat Estimates, Sales Rise Y/Y
Hexcel Corporation reported second-quarter 2023 adjusted earnings of 50 cents per share, which beat the Zacks Consensus Estimate of 48 cents by 4.2%. The bottom line improved 51.5% from the year-ago earnings of 33 cents per share.
In the quarter under review, the company posted GAAP earnings of 50 cents per share compared with the prior-year quarter’s earnings of 53 cents.
Total Sales
In the second quarter, net sales totaled $454 million, which beat the Zacks Consensus Estimate of $445 million by 2.2%. Also, the top line witnessed an improvement of 15.6% from the year-ago quarter’s $393 million.
Operational Update
Hexcel's gross margin in the second quarter was 24.4% compared with 22.8% in the prior-year period. This was driven by higher sales volume leverage.
SG&A expenses increased 6.6%. Meanwhile, research and technology expenses for the second quarter of 2023 rose 17.7% year over year.
HXL’s adjusted operating income was $61.8 million in the quarter compared with $44.7 million in the year-ago period.
Segmental Performance
Commercial Aerospace:Net sales increased 16.1% year over year to $264.3 million. The rise was driven by growth in the Airbus A350 and Boeing 787 programs.
Space and Defense:Net sales rose 22.9% year over year to $137.5 million. The increase can be attributed to growth across several platforms globally, including fighter aircraft, particularly the F-35 and Rafale, as well as the Black Hawk, civilian helicopters and space programs.
Industrial:Net sales decreased 1.9% year over year to $52.5 million. The decline was primarily due to lower wind energy and recreation sales.
Financial Details
As of Jun 30, 2023, cash and cash equivalents were $104.2 million compared with $112 million as of Dec 31, 2022.
The long-term debt totaled $779 million as of Jun 30, 2023, up from $723.3 million as of 2022-end.
During the six months ended Jun 30, 2023, the company’s cash outflow from operating activities was $30.1 million compared with $18.3 million in the prior-year period.
Hexcel’s adjusted free cash outflow for the six months ended Jun 30, 2023 was $44.7 million compared with $19.6 million in the prior-year period.
2023 Guidance
The company updated its 2023 financial guidance. Hexcel now expects to generate sales in the band of $1.765-$1.835 billion, up from the previous guidance range of $1.725-$1.825 billion. The Zacks Consensus Estimate for sales, pegged at $1.80 billion, is in line with the midpoint of the company's guidance range.
HXL now expects to generate adjusted earnings per share in the range of $1.80-$1.94 in 2023, revised up from the prior expected range of $1.70-$1.90. The Zacks Consensus Estimate for sales, pegged at $1.90 per share, is higher than the midpoint of the company's guidance range.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Hexcel has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Hexcel has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Hexcel belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, AAR (AIR), has gained 4.4% over the past month. More than a month has passed since the company reported results for the quarter ended May 2023.
AAR reported revenues of $553.3 million in the last reported quarter, representing a year-over-year change of +16.2%. EPS of $0.83 for the same period compares with $0.72 a year ago.
AAR is expected to post earnings of $0.73 per share for the current quarter, representing a year-over-year change of +19.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for AAR. Also, the stock has a VGM Score of B.
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