Hexcel Corp. (HXL) Misses Q3 EPS by 37c, Revenues Miss

Hexcel Corp. (NYSE: HXL) reported Q3 EPS of ($0.29), $0.37 worse than the analyst estimate of $0.08. Revenue for the quarter came in at $286.9 million versus the consensus estimate of $360.99 million.

• Q3 2020 GAAP diluted EPS was $0.12 with adjusted diluted EPS of ($0.29), compared to Q3 2019 GAAP diluted EPS and adjusted diluted EPS of $0.93 and $0.90, respectively.
• Q3 2020 Sales were $287 million, compared to $572.5 million in Q3 2019.
• Free Cash Flow YTD of $109 million, with $76 million generated in the third quarter.
• Liquidity remains strong, at $766 million, with cash on hand of $68 million and an undrawn revolver balance of $698 million, at September 30, 2020.

Chairman, CEO and President Nick Stanage said, “In the third quarter of 2020, Hexcel faced significant headwinds resulting from the current unprecedented decline in demand impacting our industry. Sales were half of 2019 levels, and adjusted EPS was a negative 29 cents. We have taken rapid and significant actions over the past several months to cut overhead costs and reduce employment costs to align with demand levels lowered due to the effects of the pandemic. Together, these actions have reduced annualized overhead costs by more than $150 million and will better position us over the next several quarters as we adjust to build rate reductions announced by our key customers, compounded by extensive supply chain adjustments. Our foundation remains strong as demonstrated by $76 million of free cash flow generated in the third quarter, resulting in $109 million of free cash flow year to date, further strengthening our strong balance sheet.

“As the year has progressed, the dramatic downturn especially in the commercial aerospace market has become clearer and, as a result, we believe these channel adjustments will take another two to three quarters to work through the system. We are staying close to our customers to understand their forecasts and to align with changing demand. Employee safety remains a key priority at Hexcel. Redesigned work cells, production flows and processes along with social distancing, enhanced cleaning and sanitation processes, and additional personal protection equipment are helping to keep employees safe. Our focus is clear – to generate and tightly manage cash and maintain our strong balance sheet, while at the same time remaining agile and preparing ourselves for the demand recovery ahead. We are taking aggressive actions to position ourselves to be ready to deliver strong incremental margins as our markets stabilize and growth returns.”

Mr. Stanage continued, “As we look toward 2021, we will continue aligning our costs with projected sales and take swift actions to ensure that we continue delivering value to our shareholders now and well into the future. The overall long-term demand for aircraft and our advanced composites technology remains robust, and the potential for a significant upturn in 2022 and beyond looks positive. The actions we are taking will ensure that Hexcel emerges from the effects of this pandemic stronger than ever. As we do, our liquidity will have been strengthened, our cost structure will be reset, and we will be well positioned to deliver strong shareholder returns.”

For earnings history and earnings-related data on Hexcel Corp. (HXL) click here.

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