Canada Markets closed

Why Is Hexcel (HXL) Up 9.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Hexcel (HXL). Shares have added about 9.2% 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 Q3 Earnings Beat Estimates, Sales Rise Y/Y

Hexcel Corporation reported third-quarter 2022 adjusted earnings of 33 cents per share, which exceeded the Zacks Consensus Estimate of 32 cents by 3.1%.

The bottom line improved massively from the year-ago earnings of 8 cents per share, reflecting growth of a solid 153.8%.

In the quarter under review, the company posted GAAP earnings of 31 cents compared with the prior-year quarter’s earnings of 11 cents per share.

Total Sales

In the third quarter, net sales totaled $364.7 million, which lagged the Zacks Consensus Estimate of $391 million by 6.8%. However, the top line witnessed an improvement of 9.3% from the year-ago quarter’s $333.8 million.

Operational Update

Hexcel's gross margin in the third quarter was 22.4% compared with 19.8% in the prior-year period, driven by higher sales.

SG&A expenses declined by 9.4%, whereas research and technology expenses for the third quarter of 2022 increased by 11.5% year over year.

HXL’s adjusted operating income amounted to $41.2 million in the quarter compared with the $23.6 million incurred in the year-ago period.

Segmental Performance

Commercial Aerospace: Net sales increased 25.1% year over year to $209.1 million, driven by growth in the A350 and A320 neo programs.

Space and Defense: Net sales decreased 1.6% year over year to $108.6 million. The decrease can be attributed to the impact of foreign exchange rates on European military and space sales.

Industrial: Net sales decreased 16.4% year over year to $47 million, primarily due to lower wind energy sales and the negative impact of foreign exchange.

Financial Details

As of Sep 30, 2022, cash and cash equivalents were $90.9 million compared with $127.7 million as of Dec 31, 2021.

The long-term debt totaled $797 million as of Sep 30, 2022, down from $822.4 million as of 2021-end.

In the third quarter of 2022, cash flow from operating activities was $56.4 million compared with $64.2 million in the prior-year period.

Hexcel’s adjusted free cash outflow for the nine months ended Sep 30, 2022 was $1.9 million compared to the free cash inflow of $49.2 million in the prior-year period.

2022 Guidance

The company changed its 2022 financial guidance.

Hexcel now expects to generate sales in the range of $1.53-$1.60 billion compared with the previous guidance in the band of $1.50-$1.63 billion in 2022. The Zacks Consensus Estimate for sales, pegged at $1.57 billion, is in line with the midpoint of the guidance range.

The company now projects to generate adjusted earnings per share in the range of $1.12-$1.24, up from the previously guided range of $1.00-$1.24 in 2022. The Zacks Consensus Estimate for sales, pegged at $1.19, is higher than the midpoint of the guidance range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -5.26% due to these changes.

VGM Scores

Currently, Hexcel has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hexcel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Hexcel Corporation (HXL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research