Yahoo Finance Hexcel Corp (HXL) Q1 2024 Earnings Call Transcript Highlights: Navigating Through Aerospace and ...
Q1 2024 Revenue: $472 million, up 3% from Q1 2023.
Adjusted Diluted EPS: $0.44, down year-over-year but up sequentially.
Gross Margin: Trending upwards, improved sequentially.
Commercial Aerospace Sales: Nearly $300 million, up 5% in constant currency.
Space & Defense Sales: $139 million, increased 10% in constant currency.
Industrial Sales: Approximately $34 million, declined over 28% in constant currency.
Stock Repurchase: $101 million of stock repurchased.
Quarterly Dividend: $0.15 per share.
Adjusted Operating Income: $54.1 million or 11.5% of sales.
Free Cash Flow: Negative $35.7 million.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you help us to think about the biggest drivers and how you would prioritize what's going to get you to that mid-teens growth? Is it the confidence in the widebody ramps at this point? Or is it narrowbody kind of getting back on track and getting through some of the issues that's been struggling with over the last couple of quarters? A: Nick L. Stanage - Hexcel Corporation - Chairman of the Board, President & CEO: It's a combination of both. The supply chain and the narrowbody continue to face challenges, but there has been steady performance and growth with Airbus and Boeing. Confidence in the supply chain's improvement remains strong. Widebodies have shown steady growth, particularly in the Boeing 787 and Airbus A350 programs. The ability to hire, train, and retain staff is improving, which stabilizes the supply chain and boosts efficiency.
Q: On Space & Defense, you had a really strong start to the year. How do you see the potential for upside relative to the guide, considering you have the CH-53K still ramping and there may be solid demand pull from the military side? A: Nick L. Stanage - Hexcel Corporation - Chairman of the Board, President & CEO: The start of the year has been encouraging, and Hexcel is involved in a diverse set of platforms globally. The company is optimistic about exceeding top line estimates, especially given the global geopolitical situation which tends to stimulate investment in defense systems.
Q: Could you talk a little bit about the destocking? Last quarter, you had said to expect a little bit of pressure from that in the first half. Are we mostly through that at this point? A: Nick L. Stanage - Hexcel Corporation - Chairman of the Board, President & CEO: There wasn't significant destocking in the first quarter. If anything, there might have been a bit of restocking, especially on the widebodies, due to steady growth rates. The supply chain for the Boeing 737 MAX has been very level and steady for several quarters, indicating minimal destocking or restocking.
Q: Maybe just a follow-up on the first question on the Commercial Aerospace side. It sounds like from your comments, Nick, you expect some choppiness. And so maybe the second quarter is potentially stronger on a year-over-year basis but probably not meaningfully. Based on maintaining the up and mid-teens guide just for the segments that would imply, I guess, 20% plus back half growth. I'm just curious what your visibility is? And if you could give any commentary on sort of what your expectation is on the A350? A: Nick L. Stanage - Hexcel Corporation - Chairman of the Board, President & CEO: Visibility and communications with customers have never been better. Hexcel has good insight into customer inventory levels and production plans. The company is encouraged by the A350, especially with the upcoming freighter version and strong backlog. The international travel recovery is expected to accelerate the demand for widebodies.
Q: On the margin side. Last quarter, you said you expected 13.5% to 14% operating margin for the year. It seems like off to a fine start in the first quarter. Curious if that is -- that range remains intact. And as we think about 14%, what would need to happen to get us there, just to be on the higher end of the revenue guide? A: Patrick Joseph Winterlich - Hexcel Corporation - Executive VP, CFO & Acting Corporate Controller: The guidance for 2024 has been reaffirmed, and the company is confident in achieving the 13.5% to 14% operating margin. The first quarter is typically lower due to additional stock compensation costs, but further volume leverage and growth are expected to improve margins as the year progresses.
Q: Maybe just a follow-up on Matt's question there. If we back out the comp in the first quarter, margins look like they're going to be sort of flattish the rest of the year even on the higher sales that you kind of expect as the year goes on. So just to be clear, was there anything in 1Q that was mix beneficial or anything just we should be thinking about as we think about the next couple of quarters? A: Patrick Joseph Winterlich - Hexcel Corporation - Executive VP, CFO & Acting Corporate Controller: The first quarter was particularly clean, with a good normal mix of Aerospace, Space & Defense business. There were no significant oddities affecting margins, and the company expects continued positive momentum and steady progress throughout the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
