HXL - Why the Market Is Wrong: The Sell-Off Is a Golden Buying Opportunity in This High-Flying Stock
2023-08-05 05:47:00 ET
Advanced composite materials company Hexcel (NYSE: HXL) raised its full-year sales and earnings guidance recently, only to be met with an immediate sell-off in its stock. It's now down more than 5% since the report. There are reasons for the decline, not least the reduction in free-cash-flow (FCF) guidance and declining profit margins. Still, I think this is creating an excellent buying opportunity in a long-term growth stock. Here's why.
Hexcel manufactures and sells advanced composites used in the aerospace and defense industries, as well as in an array of industrial uses such as wind turbines. Its composites offer strength and weight advantages over traditional materials like aluminum.
That's a significant plus in airplane design as it enables greater fuel efficiency, giving planes increased ranges and reduced carbon emissions. As such, the key growth drivers of Hexcel's revenue are increased airplane production ( Boeing and Airbus will be aggressively ramping up their production in the coming years) and the growing adoption of advanced composites on new planes -- another strong trend , and one that Boeing CEO Dave Calhoun firmly believes in .
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Why the Market Is Wrong: The Sell-Off Is a Golden Buying Opportunity in This High-Flying Stock