Hexcel (HXL) provides structural materials for commercial aerospace, space and defense, and industrial applications.
In its Q3 numbers this week, Hexcel outperformed earnings estimates, but lagged on the revenue front.
Let’s have a look at Hexcel’s Q3 financials, as well as what has changed in its key risk factors that investors should know.
Revenue jumped 16.3% year-over-year to $333.8 million, but lagged estimates by $16 million. This growth came from a 29.8% growth in Commercial Aerospace sales, and 14% growth in Industrial sales. Space and Defense sales remained relatively unchanged at $110.4 million, clocking a growth of 1.5% during this period.
The gross margin of the company expanded to 19.8% from 4.7% a year ago, on the back of a favorable sales mix and cost reduction actions taken by the company.
Earnings per share at $0.13 outperformed analysts’ estimates by $0.04. Hexcel had incurred a net loss per share of $0.29 in the comparable year-ago period. (See Insiders’ Hot Stocks on TipRanks)
Nick Stanage, CEO, and president of Hexcel, commented on the improved bottom line, “Adjusted EPS of 13 cents in the quarter reflects our on-going commitment to deliver productivity improvements through Operational excellence, our relentless focus on controlling costs following the decisive cost alignment actions taken early in the pandemic and a positive sales mix.
“We are well-positioned and ready to support increasing aircraft build rates in the months and years ahead.”
Hexcel noted that it continues to withhold its financial outlook amid the present market uncertainties induced by the COVID-19 pandemic.
On September 24, Seaport Global analyst Richard Safran lowered the stock’s rating to Hold from Buy, but did not assign any price target.
Consensus on the Street is a Hold based on five Holds, and one Sell. The average Hexcel price target of $54.60 implies 5.7% downside.
Risk Factors
According to the new TipRanks Risk Factors tool, Hexcel’s main risk categories are Finance & Corporate, Tech & Innovation, and Ability to Sell, each accounting for 20% of the total 15 risks identified. In the recent Q3 report, the company changed one key risk factor under the Macro & Political risk category.
Hexcel noted that its business has been negatively impacted by the COVID-19 pandemic, and this impact is expected to continue.
In reaction to the unfavorable conditions, Hexcel has taken steps such as decreasing headcount, lowering employee hours, and implementing furloughs at its sites. The company has also witnessed reduced demand and operational interruptions amid the pandemic.
Even after the pandemic subsides, Hexcel may continue to see an adverse impact on its business due to the impact of COVID-19 on the global economy and air travel.
Compared to a sector average Macro & Political risk factor of 12%, Hexcel’s is at 13%.
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