On Tuesday, CFRA adjusted their stance on Hexcel Corp . (NYSE: NYSE:HXL), moving the rating from Sell to Hold and increasing the price target to $69 from the previous $57.
The firm's analyst cited a revised 12-month target that reflects a 25.1 times multiple of the anticipated 2025 earnings per share (EPS), a valuation slightly below Hexcel's three-year average forward price-to-earnings (P/E) ratio but comparable to the industry average.
The upgrade comes after Hexcel reported third-quarter adjusted EPS of $0.47, surpassing consensus estimates by a penny, despite a slight miss in sales by 1.3%. CFRA has adjusted its EPS estimates, reducing the 2024 forecast by $0.08 to $2.07 and increasing the 2025 projection by $0.07 to $2.75.
The firm anticipates robust growth for Hexcel, forecasting an 8% sales increase and a 14% adjusted EPS growth in 2024, with an acceleration to 13% sales growth and 33% adjusted EPS growth in 2025.
The analyst acknowledged ongoing challenges such as supply chain issues and difficulties faced by commercial aircraft original equipment manufacturers (OEMs). However, these factors are believed to present an attractive entry point for Hexcel's stock.
The company's leading position in the market for lightweight composites, which are experiencing significant secular growth, was highlighted as a positive indicator for Hexcel's future performance.
CFRA also pointed out Hexcel's advantageous relationship with Airbus, suggesting that Hexcel is well-positioned to benefit from Airbus's expected outperformance over Boeing (NYSE:BA), with a faster ramp-up in aircraft deliveries projected for 2025. This strategic positioning is expected to support Hexcel's growth in the coming years.
In other recent news,Goldman Sachs maintained its Buy rating on Hexcel, despite shortfalls in segment EBIT and free cash flow. BMO Capital Markets and TD Cowen both sustained their Market Perform and Hold ratings respectively, citing industry challenges and a Q3 EPS miss.
Hexcel has revised its full-year 2024 guidance, indicating that revenue and adjusted EPS are anticipated to be at the lower end of its previously stated ranges. The company expects annual revenue to fall within the range of $1.9 billion to $1.98 billion. Furthermore, Hexcel has withdrawn its intermediate-term guidance for 2026, due to ongoing supply chain difficulties and production issues within its industry.
These are recent developments for Hexcel Corporation, which also declared a regular quarterly cash dividend of $0.15 per share.
Analysts from Goldman Sachs, BMO Capital Markets, and TD Cowen continue to monitor Hexcel's financial performance closely, adjusting their expectations based on the company's revised guidance and industry challenges.
InvestingPro Insights
To complement CFRA's analysis, InvestingPro data offers additional insights into Hexcel's financial position. The company's market capitalization stands at $5.36 billion, with a P/E ratio of 50.78, indicating that investors are willing to pay a premium for Hexcel's future earnings potential. This aligns with CFRA's optimistic outlook on the company's growth prospects.
InvestingPro Tips highlight that Hexcel operates with a moderate level of debt and has liquid assets exceeding short-term obligations, suggesting a stable financial foundation. This financial stability could be crucial as the company navigates the challenges in the aerospace industry and positions itself for the anticipated growth in 2024 and 2025.
Interestingly, while CFRA has upgraded its outlook, InvestingPro Tips note that seven analysts have revised their earnings downwards for the upcoming period. This contrast in perspectives underscores the importance of considering multiple viewpoints when evaluating investment opportunities.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Hexcel, providing a deeper understanding of the company's financial health and market position.
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