John McNulty, an analyst from BMO Capital, maintained the Hold rating on Hexcel (HXL – Research Report). The associated price target is $73.00.
John McNulty’s rating is based on a mix of positive growth prospects and concerns over current valuation levels. Hexcel Corporation, identified by its ticker HXL, has demonstrated a robust growth outlook through 2026, with expectations of significant top-line and earnings per share (EPS) growth. The anticipated expansion is primarily driven by increased demand in commercial aerospace, as well as steady contributions from the Space & Defense (S&D) and Industrial sectors. Additionally, margins are forecasted to improve gradually, reaching mid-teen percentages, primarily due to the increased volume of business. However, McNulty believes that the current market price of Hexcel’s stock may already reflect these optimistic projections, as evidenced by its elevated valuation multiple at 13.6 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for the estimated year 2025.
Furthermore, while Hexcel’s management has expressed confidence in achieving substantial earnings before interest, taxes, depreciation, and amortization (EBITDA) and EPS growth by 2026, and the company has a strategy in place for cash flow generation and financial flexibility, McNulty remains cautious. This caution stems from the stock’s valuation surpassing its pre-COVID-19 multiples, suggesting a risk/reward balance that does not favor significant upside potential. While McNulty acknowledges the potential for Hexcel to meet its targets, barring any major disruptions to aircraft build rates, the current valuation suggests that the growth expectations are already factored into the stock price, thus justifying the Hold rating and the expectation that Hexcel’s performance will align with the market rather than outperform it.
McNulty covers the Basic Materials sector, focusing on stocks such as TRONOX, Air Products and Chemicals, and RPM International. According to TipRanks, McNulty has an average return of 2.9% and a 54.62% success rate on recommended stocks.
In another report released yesterday, Bank of America Securities also maintained a Hold rating on the stock with a $75.00 price target.
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Hexcel (HXL) Company Description:
Hexcel Corp. engages in the development, manufacture, and market of advanced composite materials for the commercial aerospace, space and defense, and industrial markets. It operates through the following segments: Composite Materials; Engineered Products; and Corporate and Other. The Composite Materials segment comprises of carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines and pultruded profiles. The Engineered Products segment consists of lightweight high strength composite structures, engineered core and honeycomb products with added functionality, and additive manufacturing. The company was founded by Roger C. Steele and Roscoe T. Hughes in 1946 and is headquartered in Stamford, CT.
Read More on HXL:
- Hexcel price target raised to $81 from $78 at Wells Fargo
- Event 1 Description: The company announced that it will host an investor day event on April 22, 2021, from 1:00 PM to 4:00 PM ET. The event will feature presentations from the executive team, focusing on strategic initiatives, financial updates, and long-term growth strategies. Attendees will have the opportunity to ask questions during a live Q&A session. The event will be webcasted live, and a replay will be available for those who cannot attend.
Event 2 Description: The company’s board of directors has approved a new stock repurchase program, authorizing up to $500 million in buybacks. In addition to any unspent amount authorized, this new program adds to the remaining funds from their 2018 program, allowing stock repurchases through various market transactions. Details and replays of the event are accessible on the company’s investor relations website, with the assurance that this information is not formally filed for regulatory purposes.
- Hexcel announces additional $300M share repurchase program
- Hexcel sees 25% adjusted annual earnings growth through 2026
- Hexcel to hold virtual investor day
