Send me real-time posts from this site at my email

Hexcel (HXL) Misses on Q1 Earnings, Withdraws 2020 View

Hexcel Corporation HXL reported first-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 67 cents by 4.5%.

In the reported quarter, the company’s GAAP earnings came in at 50 cents compared with the prior-year quarter’s 84 cents.

The year-over-year deterioration can be attributed to the continued grounding of the Boeing BA 737 MAX and effects of the COVID-19 pandemic.

Hexcel Corporation Price, Consensus and EPS Surprise

Hexcel Corporation price-consensus-eps-surprise-chart | Hexcel Corporation Quote


Total Sales

Net sales totaled $541 million, surpassing the Zacks Consensus Estimate of $524 million by 3.3%. However, the top line witnessed a decline of 11.3% from the year-ago quarter’s $609.9 million.

While stalled production of 737 Max affected sales, temporary closures at a number of Hexcel’s plants as well as customer plants led by the pandemic resulted in reduced quarterly sales.

Operational Update

Hexcel's gross margin was 26% in the first quarter, reflecting year-over-year contraction of 140basis points.

The company’s operating incomeamounted to $65.7 million in the quarter compared with the previous year’s $102.8 million. The deterioration was mainly caused by non-recurring advisory and professional fees and expenses that the company incurred on account of its recently terminated merger with Woodward WWD.

Quarterly Performance

Commercial Aerospace: Net sales were down 12.7% year over year to $362.9 million. The grounding and subsequent production halt of 737 Max and end of the A380 program resulted in this unit’s poor top-line performance.

Space and Defense: Net sales rose 3.5% year over year to $111.6 million, primarily driven by improved sales from rotorcraft, particularly the Black Hawk program, and a number of Space programs.

Industrial: Net sales declined 23.2% year over year to $66.5 million, primarily due to soft wind energy sales on account of temporary plant closures in China and Austria arising from the COVID-19 pandemic.

Financial Details

As of Mar 31, 2020, cash and cash equivalents were $329.3 million compared with $64.4 million as of Dec 31, 2019.

Long-term debt totaled $1,389.5 million as of Mar 31, 2020, up from$1,050.6 million as of 2019-end.

At the end of first-quarter 2020, cash generated from operating activities was $8.6 million compared with $45.9 million in the prior year.

The effective tax rate for the firstquarter of 2020 was 21.9% compared with 22.7% in the year-ago period. The firstquarter of 2020was favorably impacted by deductions associated with share-based compensation payments.

The company used $25MILLION to repurchase shares of its common stock during the first quarter. The remaining authorization under the share repurchase program as of Mar 31, 2020 was $217MILLION. However, Hexcel has temporarily suspended its share repurchase program and quarterly dividend payouts, in light of the current market volatility.

Free cash outflow for the first quarter of 2020 was $18.6 million compared with$15.2 million in the first quarter of 2019.

2020 Guidance

Hexcel has withdrawn its previously provided 2020 and mid-term financial guidance due to market uncertainties as a result of the pandemic.

Zacks Rank

Hexcel currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Defense Release

Another defense stock, General Dynamics Corp. GD is set to release its first-quarter 2020 result on Apr 29.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>

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
The Boeing Company (BA): Free Stock Analysis Report
General Dynamics Corporation (GD): Free Stock Analysis Report
Hexcel Corporation (HXL): Free Stock Analysis Report
Woodward, Inc. (WWD): Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue