HXL - Embedded Expectations Analysis - 2020 07 07
Hexcel Corporation (HXL:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 33.2x Uniform P/E. Even at these levels, themarket has bearish expectations for the firm, and management may be concerned about their cost savings initiatives, working capital management, and their liquidity position
Specifically, management may lack confidence in their ability to quickly react to falling demand by adjusting costs, meet their labor cost savings target, and reduce overhead
and discretionary costs. In addition, they may have concerns about softening demand in their industrial submarkets, further coronavirus-related impacts on sales, and their Roussillon plant shutdown. Furthermore, management may lack confidence in their ability to expand Composite Materials operating margins, manage their working capital, and reduce their leverage ratio. Moreover, they may be exaggerating the strength of their balance sheet and liquidity, their focus on accelerating innovation and growth, and their focus on cash generation and preservation
Hexcel is a composites company with two reportable segments. The Composite Materials segment manufactures and markets carbon fibers, fabrics and specialty reinforcements, prepregs and other fiber-reinforced matrix materials, structural adhesives, honeycomb, molding compounds, tooling materials, polyurethane systems and laminates that are incorporated into several applications, including military and commercial aircraft, wind turbine blades, recreational products, transportation and other industrial applications. The Engineered Products segment manufactures and markets composite structures and precision machined honeycomb parts primarily for use in the aerospace industry.
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