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Hexcel's (HXL) Q4 Earnings Surpass Estimates, Revenues Miss

Zacks Equity Research
·4-min read

Hexcel Corporation HXL reported fourth-quarter 2019 adjusted earnings of 86 cents per share, surpassing the Zacks Consensus Estimate of 85 cents by 1.2%. Further, the bottom line improved 4.9% from the prior-year quarter’s 82 cents.

In the reported quarter, the company’s GAAP earnings came in at 86 cents compared with the prior-year quarter’s 76 cents.

For 2019, Hexcel's earnings were $3.54 per share, up 16.1% from $3.05 in the year-ago period. The full-year earnings figure surpassed the Zacks Consensus Estimate of $3.53 by 0.3%.

Total Revenues

Net sales totaled $564.3 million, which missed the Zacks Consensus Estimate of $591.1 million by 4.5%. However, the top line witnessed an increase of 0.6% from the year-ago quarter’s $561 million.

In 2019, total revenues grew 7.6% year over year to $2,355.7 million. However, the full-year revenues figure missed the Zacks Consensus Estimate of $2,380 million by 1%.

Operational Update

Hexcel's gross margin was 26% in the fourth quarter, reflecting a year-over-year contraction of 80 basis points.

The company’s operating expenses amounted to $49.1 million in the quarter compared with the previous year’s $54.6 million. Selling, general and administrative expenses were up 13.3%, while research and technology expenses were down 13.2%.

Quarterly Performance

Commercial Aerospace: Net sales were down 1.5% year over year to $379.8 million. The decline can be attributed to lower sales for legacy narrow-body programs.

Space and Defense: Net sales rose 18% year over year to $115.3 million, primarily owing to growth across several defense and space programs, and the F-35 Joint Strike Fighter (JSF) program alongside the contribution from ARC Technologies.

Industrial: Net sales declined 11.2% year over year to $69.2 million, primarily due to soft wind energy sales.

Hexcel Corporation Price, Consensus and EPS Surprise

Hexcel Corporation Price, Consensus and EPS Surprise
Hexcel Corporation Price, Consensus and EPS Surprise

Hexcel Corporation price-consensus-eps-surprise-chart | Hexcel Corporation Quote

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Financial Details

As of Dec 31, 2019, cash and cash equivalents were $64.4 million compared with $32.7 million as of Dec 31, 2018.

Long-term debt totaled $1,050.6 million as of Dec 31, up from $947.4 million as of 2018-end.

At the end of 2019, cash generated from operating activities summed $491.1 million compared with $421.4 million in the prior year.

Other Financial Updates

The effective tax rate for the fourth quarter of 2019 was 16.6% compared with 24.2% in the year-ago period. The fourth quarter of 2019 was favorably impacted by a rate adjustment

The company used $76 million to repurchase shares of its common stock during the fourth quarter of 2019, bringing the total share repurchase value to $143 million in 2019. The remaining authorization under the share repurchase program as of Dec 31 was $242 million.

2020 Guidance

Hexcel forecasts its free cash flow to exceed $300 million and accrual basis capital expenditures to remain between $100 million and $120 million in 2020. The underlying effective tax rate is estimated at 23%.

Zacks Rank

Hexcel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Teledyne Technologies Inc. TDY reported fourth-quarter 2019 adjusted earnings of $2.90 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 5.1%. The bottom-line figure came above the guided range of $2.71-$2.76 for the reported quarter.

Lockheed Martin Corp. LMT reported fourth-quarter 2019 earnings of $5.29 per share, which surpassed the Zacks Consensus Estimate of $4.99 by 6%. The bottom line also improved 20.5% from $4.39 in the year-ago quarter.

General Dynamics Corporation’s GD fourth-quarter earnings from continuing operations of $3.51 per share beat the Zacks Consensus Estimate of $3.46 by 1.45%.

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