Hexcel Q2 Earnings Beat Estimates, Sales Decline Y/Y

Core Viewpoint - Hexcel Corporation's share price declined by 2% to $61.11 following its second-quarter 2025 earnings release, which showed a decrease in adjusted earnings and net sales compared to the previous year [1][9]. Financial Performance - Hexcel reported adjusted earnings of 50 cents per share for Q2 2025, down 16.7% from 60 cents in the same quarter last year, but exceeded the Zacks Consensus Estimate of 46 cents by 8.7% [1][9]. - GAAP earnings were reported at 17 cents per share, a significant decline of 71.7% from the prior year's 60 cents [1]. - Total net sales for Q2 2025 were $489.9 million, surpassing the Zacks Consensus Estimate of $471 million by 4%, but down 2.1% from $500.4 million in Q2 2024 [3][9]. Operational Insights - The gross margin for Q2 2025 was 22.8%, a contraction of 250 basis points from the previous year, attributed to lower sales and unfavorable cost leverage due to inventory reduction actions [4]. - Selling, general and administrative (SG&A) expenses increased by 7.8% year over year to $43 million, while research and technology expenses decreased by 2.7% to $14.3 million [5]. Market Segment Performance - In the Commercial Aerospace segment, net sales fell by 8.6% year over year to $293.1 million, impacted by lower sales from major programs including Airbus A350 and A320neo, and Boeing 787 and 737 MAX [6]. - Conversely, the Defense, Space & Other segment saw a 9.5% increase in net sales to $196.8 million, driven by strong demand from various military and space programs [7][9]. Financial Position - As of June 30, 2025, Hexcel's cash and cash equivalents were $77.2 million, down from $125.4 million at the end of 2024, while long-term debt increased to $827.7 million from $700.6 million [10]. - The company reported a cash outflow from operating activities of $5.2 million in the first half of 2025, compared to a cash inflow of $37.2 million in the same period last year [10]. Guidance - Hexcel maintained its 2025 guidance, expecting sales between $1.88 billion and $1.95 billion, with the Zacks Consensus Estimate at $1.91 billion [12]. - The company anticipates adjusted earnings per share in the range of $1.85 to $2.05, with the Zacks Consensus Estimate at $1.87 [12]. - Hexcel also expects to generate approximately $190 million in free cash flow for 2025, with capital expenditures projected to be less than $90 million [13].