Hexcel Provides Financial Outlook
- None.
- None.
Insights
Hexcel Corporation's projected sales growth of 10%-12% CAGR over the next three years is indicative of a robust demand in key sectors such as commercial aerospace, which itself is expected to grow at a CAGR of 12%-16%. This is significant as it demonstrates the company's alignment with industry recovery trends, especially post-pandemic. The anticipated growth in aerospace is likely due to a combination of increased travel demand and fleet upgrades, where Hexcel's lightweight composites play a critical role.
The company's forecast for adjusted diluted EPS to grow at a rate greater than 25% CAGR is particularly noteworthy for investors, as it suggests an expectation of operational efficiency and margin expansion. This could be due to scale benefits, cost management and potentially higher pricing power in the marketplace. Hexcel's focus on cash generation, with a target of more than $800 million in free cash flow, also suggests a healthy financial position that could support strategic initiatives and shareholder returns.
Hexcel's emphasis on its competitive advantages such as innovation, long-term customer relationships and a broad market presence highlights the company's strategic positioning within the advanced composites sector. The reference to 'secular growth' indicates that Hexcel is tapping into long-term industry trends like lightweighting, which is critical for fuel efficiency and emissions reduction—a key factor in industries such as automotive and renewable energy systems.
Moreover, the company's planned capital expenditures of less than $100 million annually signal a disciplined approach to investment, focusing on maintaining or enhancing operational capabilities without overextending financially. This conservative capex strategy, combined with the strong cash flow forecast, may provide Hexcel with the flexibility to pursue strategic acquisitions, further enhancing its market position and product offerings.
It is important to note that Hexcel's financial outlook includes non-GAAP measures such as adjusted EBITDA and free cash flow. While these metrics provide a useful perspective on the company's operational performance and cash generation capabilities, they exclude certain items that are typically required in GAAP financial statements. Investors should be aware of the limitations of these non-GAAP measures, as they do not include all income and expense items that affect the company's financial performance.
Hexcel's disclaimer regarding the absence of a quantitative reconciliation of non-GAAP outlook to GAAP measures due to future uncertainties highlights the need for investors to exercise caution. While non-GAAP measures can be valuable analytical tools, they should be considered alongside GAAP results to gain a complete picture of the company's financial health.
Chairman, CEO and President Nick Stanage said: “Hexcel is benefitting from both cyclical growth as aircraft production rates increase to support strong demand, and from secular growth reflecting our advanced composite technology value proposition as lightweighting supports fuel efficiency and emissions reduction. We are forecasting strong sales growth over the next three years, and we expect robust earnings expansion as we leverage our global manufacturing footprint. We are entering a period of strong cash generation, which will support continued investment in operational excellence and organic growth, the potential for strategic acquisitions, and returning cash to stockholders.”
Outlook
For the three-year period 2024 to 2026:
-
Total Sales to grow at a compounded annual growth rate (CAGR) of
10% -12% -
Commercial Aerospace
12% -16% CAGR -
Space & Defense
5% -10% CAGR -
Industrial
3% -6% CAGR
-
Commercial Aerospace
-
Adjusted Diluted Earnings Per Share* to grow at greater than a
25% CAGR -
Capital Expenditures of less than
$100 million
Cumulatively for the three-year period 2024 to 2026:
-
Adjusted EBITDA* greater than
$1.5 billion -
Free Cash Flow* greater than
$800 million
Share repurchase update:
-
Approximately
$65 million -
Board of Directors approved an additional
$300 million
Mr. Stanage continued, “We have the right team in place, our innovation is a powerful competitive advantage, our long-term customer relationships are broad and deep, and our markets are growing - all of which support continued and compelling value creation for our stockholders.”
As previously disclosed, the management audio presentation was webcast live and a supporting slide deck is available on the investor relations webpage of the Hexcel website at www.Hexcel.com. A replay will be available on the investor relations webpage of the Hexcel website.
*Non-GAAP Measures
Adjusted diluted earnings per share, adjusted earnings before interest, taxes, depreciation and amortization, and free cash flow (defined as cash provided by operating activities less cash payments for capital expenditures) are non-GAAP measures. Management believes that adjusted diluted earnings per share, EBITDA and free cash flow are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results excluding special items. Special items represent significant charges or credits that are important to an understanding of Hexcel’s overall operating results in the periods presented. Non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to GAAP measures of performance. The Company is not providing a quantitative reconciliation of our non-GAAP outlook or targets to the corresponding GAAP information because the GAAP measures that we exclude from our non-GAAP outlook and targets are difficult to predict and are primarily dependent on future uncertainties.
Disclaimer on Forward Looking Statements
This news release contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements that are not of historical fact constitute “forward-looking statements” and accordingly, involve estimates, assumptions, forecasts, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Forward Looking Statements and Risk Factors sections of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission. We do not undertake an obligation to update our forward-looking statements to reflect future events.
*****
About Hexcel
Hexcel Corporation is a global leader in advanced lightweight composites technology. We propel the future of flight, energy generation, transportation, and recreation through excellence in providing innovative high-performance material solutions that are lighter, stronger and tougher, helping to create a better world for us all. Our broad and unrivaled product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, space and defense, and industrial applications.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220964232/en/
Kurt Goddard | Vice President Investor Relations | Kurt.Goddard@Hexcel.com | +1 (203) 352-6826
Source: Hexcel Corporation
FAQ
What is Hexcel Corporation's ticker symbol?
What was announced during Hexcel Corporation's Investor Day?
What is the projected total sales growth for Hexcel Corporation?
What is the expected CAGR for Commercial Aerospace sales for Hexcel Corporation?
What are the financial targets set by Hexcel Corporation for 2024-2026?
