HXL - Destocking And High Fixed Operating Leverage Hammer Hexcel

• Hexcel posted a steep decline in revenue and profits (and big misses relative to sell-side expectations), as customer destocking magnified significant current demand weakness.
• With high fixed leverage, Hexcel is seeing significant decremental margins, and I expect management to look to reduce operating costs further.
• I continue to believe that air travel demand will recover, as will demand for widebody aircraft, but that's a multi-year story, and Hexcel's defense and industrial businesses neutralize that.
• I believe fair value is in the low-to-mid $30s, but uncertainty is even higher than normal, and it may be hard to make a compelling "buy" case for these shares for at least a few more quarters.

For further details see: