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Hexcel (HXL) Q3 Earnings Match Estimates, Revenues Miss

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Hexcel (HXL) Q3 Earnings Match Estimates, Revenues Miss

Hexcel's (HXL) net industrial sales surged 37% year over year to $77 million, driven by high wind energy sales.

Hexcel Corporation HXL reported third-quarter 2018 adjusted earnings of 80 cents per share, which came in line with the Zacks Consensus Estimate. The bottom line improved 12.7% from the prior-year quarter’s figure of 71 cents.

In the reported quarter, the company’s GAAP earnings came in at 91 cents compared with the year-ago quarter’s figure of 76 cents.

Total Revenues

The company’s net sales totaled $540.5 million, which missed the Zacks Consensus Estimate of $544 million by 0.6%. However, the top line witnessed an increase of 10% from the year-ago quarter’s figure of $491.5 million.

Operational Update

Hexcel's gross margin was 26.5% in the third quarter, reflecting a contraction of 110 basis points year over year.

The company’s operating expenses amounted to $46.5 million in the quarter, which came in line with the year-ago quarter’s operating expenses. Selling, general and administrative expenses were down by 6%, while research and technology expenses were up 17.8 %.

Quarterly Performance

Commercial Aerospace: Net sales were up 5.8% year over year to $373.1 million. The uptick can be attributed to a number of Bombardier, Embraer and Dassault programs along with new commercial aircraft programs.

Space and Defense: Net sales rose 9.3% year over year to $90.4 million, primarily owing to growth across a number of military, rotorcraft and space programs.

Industrial: Net sales surged 37% year over year to $77 million, driven by high wind energy sales.

Hexcel Corporation Price, Consensus and EPS Surprise

Hexcel Corporation Price, Consensus and EPS Surprise | Hexcel Corporation Quote

Financial Details

As of Sep 30, 2018, cash and cash equivalents were $47.2 million compared with $60.1 million as of Dec 31, 2017.

Long-term debt totaled $980.7 million as of Sep 30, 2018, up from $805.6 million as of Dec 31, 2017.

At the end of the third quarter, cash generated from operating activities summed $278.4 million compared with $308.5 million in the year-ago period.

The effective tax rate for the quarter was 9.1% compared with 16.5% in the third quarter of 2017. The company used $102 million to repurchase shares of its common stock during the third quarter of 2018. The remaining
authorization under the share repurchase program on Sep 30, 2018 was $460 million.

2018 Guidance

Management narrowed its 2018 guidance. The company currently expects 2018 sales to be in the range of $2.14-$2.20 billion, compared to prior guidance band of $2.10-$2.20 billion. Moreover, it currently projects adjusted earnings per share to be in the range of $2.99-$3.07, compared to earlier range of $2.96-$3.10.

However, Hexcel continues to forecast its free cash flow to exceed $230 million and accrual basis capital expenditures to remain between $170 million and $190 million, in 2018.

Zacks Rank

Hexcel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Textron Inc. TXT reported third-quarter 2018 adjusted earnings from continuing operations of 61 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 19.7%.

AAR Corp. AIR reported first-quarter fiscal 2019 adjusted earnings of 54 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents by 3.9%.

Upcoming Defense Releases

L3 Technologies LLL is expected to report third-quarter 2018 results on Oct 25. The company has an Earnings ESP of +8.05% and a Zacks Rank #2.

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