Volatility is easy to overcome when there is a great earnings trend. Hexcel, Corp. is a prime example. While shares have their ups and downs, the solid earnings history and upward estimate revisions warrant a deeper look at this Zacks #1 Rank (Strong Buy).
Hexcel makes composites for lightweight, high-performance structural materials. Their products are used in for aerospace and industrials applications.
Net Income Doubles
On Oct 24 Hexcel reported its third-quarter results that showed a 20% jump in revenue, to $352 million. Net income jumped from $15.6 million, to $32.2 million.
After adjustments, EPS came out to $0.34, up from $0.20. That was 7 cents higher than the Zacks Consensus Estimate and gave the company its third consecutive earnings surprise and seventh in the past 8 quarters.
Raising the Bar
On top of the earnings beat Hexcel significantly raised its full-year guidance. Net income is now expected to come in between $1.18 and $1.23 per share, up from between $1.05 and $1.12.
Analysts quickly jumped on board as well. The average forecast for this year is up 11 cents to $1.23. Next year's Zacks Consensus Estimate is up 7 cents, to $1.39.
Last year Hexcel brought in $0.78 per share, so the growth rates are currently at 57% and 13%, respectively. The 3-5 year rate is just over 14%.
Shares of HXL are going for 20 times this year's estimates and have a PEG ratio of 1.4. Neither is overly enticing but there is not much of a premium built in either. The same can be said for the P/S at 1.8 times and the P/B of 3.1.
It is pretty easy to get lost in the noise when following stocks. But, if you take a step back and look at overall earnings trends, this is exactly what you like to see. Estimates moving up throughout the year and solid year over year growth.
Volatility in the stock will remain, but in the long run the great earnings trend should keep pushing shares higher. -
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service