It has been about a month since the last earnings report for Hexcel (HXL - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
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 catalysts.
Hexcel Misses on Q1 Earnings, Withdraws 2020 View
Hexcel 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 50cents compared with the prior-year quarter’s 84 cents.
The year-over-year deterioration can be attributed to the continued grounding of the Boeing 737 MAX and effects of the COVID-19 pandemic.
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.
Hexcel's gross margin was 26% in the first quarter, reflecting year-over-year contraction of 140 basis 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.
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.
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 $25 million 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.
Hexcel has withdrawn its previously provided 2020 and mid-term financial guidance due to market uncertainties as a result of the pandemic.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -12.5% due to these changes.
Currently, Hexcel has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Hexcel has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.