Hexcel Q1 Earnings and Revenues Miss, 2025 Guidance Lowered

Core Viewpoint - Hexcel Corporation (HXL) reported a decline in adjusted earnings and net sales for the first quarter of 2025, attributed to lower performance in the Commercial Aerospace market and overall operational challenges [1][2][3]. Financial Performance - Adjusted earnings per share for Q1 2025 were 37 cents, down 15.9% from 44 cents in the same quarter last year, and below the Zacks Consensus Estimate of 43 cents by 14% [1] - GAAP earnings per share were 35 cents, a decrease of 18.6% from 43 cents year-over-year [1] - Net sales totaled $456.5 million, missing the Zacks Consensus Estimate of $475 million by 3.8% and falling 3.3% from $472.3 million in the prior year [3] Operational Update - Gross margin for Q1 2025 was 22.4%, a contraction of 260 basis points from the previous year, primarily due to lower sales leverage [4] - Adjusted operating income was $45.3 million, down from $54.1 million in the year-ago period [5] - Selling, general and administrative (SG&A) expenses decreased by 11.6% year-over-year to $43.3 million, while research and technology expenses dropped 8.6% to $13.8 million [4] Market Contribution - In the Commercial Aerospace segment, net sales decreased by 6.4% year-over-year to $280.1 million, driven by lower sales of Boeing 787 and MAX [6] - The Space and Defense segment saw a 2% increase in net sales to $176.4 million, supported by strong sales from various helicopter and space programs [7] Financial Details - As of March 31, 2025, cash and cash equivalents were $89.2 million, down from $125.4 million at the end of 2024 [8] - Long-term debt increased to $787.1 million from $700.6 million at the end of 2024 [8] - Cash used in operating activities was $28.5 million, compared to $7 million in the prior year [8] - Adjusted free cash outflow was $54.6 million, up from $35.7 million year-over-year [9] 2025 Guidance - Hexcel lowered its 2025 sales guidance to a range of $1.88-$1.95 billion, down from $1.95-$2.05 billion, with the Zacks Consensus Estimate at $1.97 billion [10] - Adjusted earnings per share guidance was revised to $1.85-$2.05, lower than the previous range of $2.05-$2.25, with the Zacks Consensus Estimate at $2.10 [11] - Expected free cash flow for 2025 is now approximately $190 million, reduced from over $220 million, with capital expenditure outlook lowered to less than $90 million [12]