HXL - Better Buy: Boeing or Hexcel?
The aerospace giant Boeing (NYSE: BA) or one of its key suppliers, Hexcel (NYSE: HXL) , for 2023? It's an interesting question because the two companies share a common earnings driver: increasing aircraft production. So which one is the better buy? Here's the lowdown.
Hexcel is a manufacturer of advanced lightweight composites used in commercial aerospace, space and defense, and industrial applications (notably in wind energy). Its key end market, representing around 57% of sales, is commercial aerospace, whereby its composites offer a weight and strength advantage over traditional metals used in airplane construction. Weight is a crucial consideration for aircraft manufacturers, like Boeing and Airbus , because it reduces the long-term running costs of an aircraft. Less weight means lower fuel requirements. Since there's very little aftermarket demand for its composites, the critical drivers of Hexcel's earnings are:
Ramping up aircraft production is also critical to Boeing's prospects. Boeing's management sees Boeing Commercial Airplanes (BCA) generating $9 billion in operating cash flow in 2025 and 2026 compared to just $3 billion at Boeing Global Services (BGS) and $2 billion at Boeing Defense, Space & Security (BDS).
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Better Buy: Boeing or Hexcel?