Why Is Hexcel (HXL) Down 8.7% Since Last Earnings Report?

Core Viewpoint - Hexcel Corporation reported strong Q3 earnings, surpassing estimates, but the stock has underperformed the S&P 500, raising questions about future performance leading up to the next earnings release [1][2][3]. Financial Performance - Adjusted earnings for Q3 2024 were 47 cents per share, a 23.7% increase from 38 cents in the same quarter last year [2]. - GAAP earnings were 49 cents per share, up 8.9% from 45 cents year-over-year [3]. - Total net sales reached $456.5 million, exceeding the Zacks Consensus Estimate of $456.2 million by 0.1% and reflecting an 8.8% increase from $419.5 million in the prior year [4]. Sales Breakdown - Sales in the Commercial Aerospace sector increased by 17.5% year-over-year to $295.9 million, driven by A350, A320neo, and Boeing 787 programs [8]. - Space and Defense sales decreased by 0.5% to $128.2 million due to lower sales from Bell V-22 and space programs [8]. - Industrial sales fell by 16.5% to $32.4 million, attributed to declines in submarkets [8]. Operational Metrics - Gross margin improved to 23.3%, a 150 basis point increase from the previous year, due to favorable cost leverage from higher sales [6]. - Adjusted operating income rose to $52.9 million from $42.8 million year-over-year [7]. Cash Flow and Debt - Cash and cash equivalents as of September 30, 2024, were $98.2 million, down from $227 million at the end of 2023 [9]. - Long-term debt increased to $805.1 million from $699.4 million at the end of 2023 [9]. - Cash flow from operating activities for the first nine months of 2024 was $127.3 million, compared to $98.1 million in the same period last year [9]. Guidance and Estimates - Hexcel has adjusted its 2024 sales guidance to the lower end of the previous range of $1.90-$1.98 billion, with the Zacks Consensus Estimate at $1.91 billion [11]. - The company expects adjusted earnings per share to be at the lower end of the range of $2.02-$2.18, with the current consensus at $2.05 [11]. - Free cash flow is projected to be approximately $200 million in 2024, with capital expenditure expected to remain below $100 million [12]. Market Sentiment - Recent estimates have trended downward, with a consensus estimate shift of -7.11% [13][14]. - Hexcel currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of below-average returns in the coming months [16].