Hexcel (HXL) Down 5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Hexcel (HXL). Shares have lost about 5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hexcel due for a breakout? 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 catalysts.

Hexcel Q1 Earnings Beat Estimates, Sales Rise Y/Y

Hexcel Corporation reported first-quarter 2022 adjusted earnings of 22 cents per share, which exceeded the Zacks Consensus Estimate of 17 cents by 29.4%.

The bottom line also improved from a loss of 10 cents per share incurred in the year-ago quarter.

In the quarter under review, the company posted GAAP earnings of 21 cents against the prior-year quarter’s loss of 17 cents.

Total Sales

Net sales during the first quarter totaled $390.6 million, which beat the Zacks Consensus Estimate of $362 million by 7.9%. Moreover, the top line witnessed an improvement of 25.9% from the year-ago quarter’s $310.3 million.

Operational Update

Hexcel's gross margin for the first quarter was 22.2% compared with 17.1% in the prior-year period, driven by higher sales and greater capacity utilization that led to improved cost absorption.

SG&A expenses rose 12.9%, whereas research and technology expenses for the first quarter of 2022 decreased by 6% year over year.

The company’s adjusted operating income amounted to $31.1 million in the quarter compared with $1.9 million incurred in the year-ago period.

Segmental Performance

Commercial Aerospace: Net sales increased by 48.3% year over year to $218.9 million, driven by higher narrowbody sales, increased Airbus A350 sales and higher business jet sales.

Space and Defense: Net sales increased by 5.8% year over year to $118.2 million. The increase can be attributed to growth in the Space, CH-53K and military jet programs.

Industrial: Net sales increased by 4.9% year over year to $53.5 million, primarily driven by the strength in recreation, consumer electronics and automotive.

Financial Details

As of Mar 31, 2022, cash and cash equivalents were $112.8 million compared with $127.7 million as of Dec 31, 2021.

Long-term debt totaled $857.5 million as of Mar 31, 2022, up from $822.4 million as of 2021-end.

In the first quarter of 2022, cash used in operating activities was $19 million compared with the cash outflow of $1.2 million in the prior year.

Hexcel’s adjusted free cash outflow in the first quarter of 2022 was $123.8 million compared to the free cash outflow of $6.1 million in the prior-year period.

2022 Guidance

The company reaffirmed its 2022 financial guidance.

Hexcel currently expects to generate sales in the range of $1.50-$1.63 billion in 2022. The Zacks Consensus Estimate for sales, pegged at $1.56 billion, is in line with the midpoint of the guidance range.

The company projects to generate adjusted earnings per share (EPS) in the range of $1.00-$1.24 in 2022. The Zacks Consensus Estimate for sales, pegged at $1.16, lies above the midpoint of the guidance range.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 5.52% due to these changes.

VGM Scores

Currently, Hexcel has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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

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