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Hexcel Beats on Q1 Earnings - Analyst Blog

By: Zacks.com
Posted: 4/22/2014 9:00:00 AM
Referenced Stocks: ATK;AVAV;BEAV;HXL

Hexcel Corp. ( HXL ) reported mixed financial results for the first quarter of 2014. While net income outpaced the Zacks Consensus Estimate, total revenue fell below the same.

Reported first-quarter 2014 earnings of 50 cents a share surpassed the Zacks Consensus Estimate by a penny and increased 16.3% year over year from earnings of 43 cents in the prior-year period.

The healthy increase in earnings was mainly attributable to diligent operational execution and the continuing growth in the commercial aerospace business. Specific initiatives for new product development and increased investment in new programs were the other positives for the company.

Revenues

For the first quarter, Hexcel reported total sales of $461.7 million, up 10.9% from $416.5 million in the prior-year quarter. However, revenues fell short of the Zacks Consensus Estimate of $454.0 million.

Margins

Hexcel's gross margin expanded 28.0% compared with 26.9% in first-quarter 2013. The company's operating margin also increased to 16.16% from 15.13% in the prior-year quarter.

Segment performance

Revenues in the Commercial Aerospace market rose 12.8% to $303.2 million year over year. Revenues from new aircraft programs increased over 25% from new programs in the prior-year period. The company's A350 and B787 aircraft shipments were the key contributors to the sales from new programs. The demand for the company's Airbus and Boeing aircraft continued to be strong and sales increased 4% year over year. Revenues from other commercial aerospace division remained flat sequentially but increased more than 10% year over year.

Revenues in the Space & Defense market stood at $95.6 million, slightly lower than the first quarter of 2013. However, revenues from the business increased about 8% above the fourth quarter of 2013. The sluggishness in the company's European and Asian programs was offset by the growth in the A400M program.

Industrial revenues were up 21.9% year over year to $62.9 million. The growth was driven by improvement across all the businesses, particularly the wind business which grew more than 15% year over year on a constant currency basis.

Balance Sheet & Cash Flow

The company's cash and equivalents balance stood at $50 million versus $65.5 million as on Dec 31, 2013. The company had a long-term debt of $352 million at the end of the reported quarter, compared with $292 million as on Dec 31, 2013.

Cash flow from operating activities marginally increased to $33.4 million from $33.2 million in the prior-year period. The company reported negative free cash flow of $22 million, wider than the negative free cash flow of $15 million in the prior-year period. The decline was due to additional capital expenditures owing to adverse weather conditions during the quarter.

Investments and Share Repurchase

During first-quarter 2014, the company made investments worth $48.3 million and repurchased nearly 1.15 billion shares. The company still has an additional capacity of $61.7 million under its authorized share repurchase program.

Outlook

Concurrent with the earnings release, management provided its guidance for full-year 2014.

The company has reaffirmed the guidance for full-year 2014 earnings in the range of $2.00 to $2.12 per share. Revenues are expected to lie between $1,800 million and $1,880 million; whereas free cash flow is anticipated to be in the range of $25 million to $75 million with accrued capital expenditures of $225 million to $250 million

Hexcel currently carries a Zacks Rank #3 (Hold). Some other stocks in the same sector worth considering include Alliant Techsystems Inc. ( ATK ), AeroVironment, Inc. ( AVAV ) and B/E Aerospace Inc. ( BEAV ). All these stocks carry a Zacks Rank #2 (Buy).



ALLIANT TECHSYS (ATK): Free Stock Analysis Report

AEROVIRONMENT (AVAV): Free Stock Analysis Report

B/E AEROSPACE (BEAV): Free Stock Analysis Report

HEXCEL CORP (HXL): Free Stock Analysis Report

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