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Why Is Hexcel (HXL) Up 2.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Hexcel (HXL - Free Report) . Shares have added about 2.27% in that time frame, outperforming the market.

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 Misses on Q2 Earnings, Tops Revenue Estimates

Hexcel Corporation reported second-quarter 2018 adjusted earnings of 75 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 1.3%. However, the bottom line improved 11.9% from the prior-year figure of 67 cents.

In the reported quarter, the company’s GAAP earnings came in at 76 cents compared with the prior-year figure of 67 cents.

Total Revenues

Net sales totaled $547.5 million, which surpassed the Zacks Consensus Estimate of $535 million by 2.3%. The top line also increased 11.4% from the year-ago figure of $491.3 million.

Operational Update

Hexcel's gross margin was 26.4% in the second quarter, reflecting a contraction of 210 basis points year over year.

The company’s operating expenses declined 3.8% year over year to $48.3 million in the reported quarter. The downside was caused by lower selling, general and administrative expenses, while high research and technology expenses rose marginally.

Quarterly Performance as per Markets

Commercial Aerospace: Net sales were up 10% year over year to $383.3 million. The uptick can be attributed to increased production rates and higher composite content on the new narrowbody aircraft.

Space and Defense: Net  sales rose 4.4% year over year to $91.7 million, primarily owing to higher rotorcraft sales.

Industrial: Net sales improved 32.1% year over year to $72 million driven by high wind energy sales.

Financial Details

As of Jun 30, 2018, cash and cash equivalents were $39.1 million compared with $60.1 million as of Dec 31, 2017.

Long-term debt totaled $930.1 million as of Jun 30, 2018, up from $805.6 million as of Dec 31, 2017.

At the end of the second quarter, cash generated from operating activities summed $157.2 million compared with $182.4 million in the year-ago period.

2018 Guidance

Hexcel reiterated its 2018 guidance. The company continues to expect its 2018 sales in the range of $2.10-$2.20 billion. Also, it continues to project adjusted diluted earnings per share in the range of $2.96-$3.10.

Moreover, Hexcel still forecasts its free cash flow to exceed $230 million and accrual basis capital expenditures between $170 million and $190 million, in 2018.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, Hexcel has a nice Growth Score of B, however its momentum is doing a bit better with an A. However, the stock was also 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.

Outlook

HXL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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