HXL - Growth Is Finally Coming for This Outstanding Stock -- Buy the Dip?
2023-11-02 07:15:00 ET
The third-quarter earnings from Hexcel (NYSE: HXL) were met with a sharp sell-off in the shares. However, I think the market is too hasty in writing off the stock due to a disappointing margin performance in the quarter, and the dip is a good buying opportunity. Here's why.
The advanced materials company's core market is the lightweight composites that are a big part of the future of the aviation industry. Because the aftermarket demand for its materials is limited, Hexcel is primarily a play on new airplane production and the increasing content of its composites in airplanes. The excellent news is that airplane manufacturers, including Boeing and Airbus , are aggressively ramping up production in response to multiyear backlogs, and the trend is toward using more composites due to their strength and weight advantage.
As such, Hexcel is reporting excellent growth, but the problem is its margin performance. The following table highlights the issue. There's nothing wrong with Hexcel's year-over-year sales growth. While its industrial sales were down 10.2%, its space and defense sales were up 15.9%, and commercial aerospace sales were up 22.1%.
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Growth Is Finally Coming for This Outstanding Stock -- Buy the Dip?