Hexcel Second Quarter Profit Tops View, But Revenue Miss; Backs 2013 Outlook

(RTTNews) - Composite materials manufacturer Hexcel Corp. (HXL) reported Monday a profit for the second quarter that edged up from last year, reflecting improved margins and revenue growth amid double-digit increase in commercial aerospace sales. Earnings per share for the quarter topped analysts' expectations by a penny, while quarterly revenues missed their estimates by a whisker. The company also maintained its earnings and revenue forecast for the full-year 2013.

Separately, Hexcel announced the appointment of Nick Stanage as the new president and CEO, effective August 1, 2013. Stanage will also join the Board of Directors. He will succeed David Berges, who will retire at the end of 2013.

The company also appointed Berges Executive Chairman of the Board until his retirement, and then will provide advisory services for one year. Berges has served as chairman and CEO of Hexcel since 2001 and is retiring after a 42 year career in Industrial and Aerospace industries.

Stanage, age 54, joined Hexcel in 2009 as president and was appointed Chief Operating Officer in May, 2012.

"This was another strong quarter for Hexcel, as solid execution combined with increased sales to yield excellent results," Berges said in a statement.

The Stamford, Connecticut-based company reported net income of $48.5 million or $0.48 per share for the second quarter, edging up from $48.0 million or $0.47 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $49.1 million or $0.48 per share, compared to $42.7 million or $0.42 per share in the year-ago quarter.

On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.47 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 5.9 percent to $422.6 million from $399.20 million in the same quarter last year, but missed fourteen Wall Street analysts' consensus estimate of $423.82 million by a whisker. Net sales in constant currency grew only 5.2 percent.

"This quarter also marked the first flight of the A350 XWB the newest Airbus offering with over 50% composite structure. The A350 XWB will be a key contributor to Hexcel's future and involves shipments to over 40 customers in 14 different countries," Berges added.

Segment-wise, commercial aerospace sales rose 15.6 percent or 15.1 percent in constant currency, to $270 million, boosted by new aircraft programs at Airbus and Boeing, particularly A380, A350, B787 and B747-8.

Industrial sales declined 28.0 percent or 28.8 percent in constant currency, to $56 million, while space & defense sales were up 9.8 percent or 9.3 percent in constant currency, to $97 million from last year.

Adjusted operating margins for the quarter improved 90 basis points to 17.0 percent from last year's 16.1 percent. Gross margins also expended 120 basis points to 27.6 percent from last year.

Looking ahead to fiscal 2013, the company continues to expect earnings in a range of $1.73 to $1.83 per share, on projected revenues between $1.64 billion and $1.74 billion, with strong aerospace markets offsetting the weakness in the industrial market.

Street is currently looking for full-year 2013 earnings of $1.81 per share, on annual revenue of $1.71 billion.

Looking ahead, Berges said, "Assuming the scheduled ramp-up of the Boeing 787 is sustained, we expect aerospace sales (both Commercial Aerospace and Space & Defense) to continue their steady growth trend. Though seasonal effects typically result in slightly lower margins in the second half, and our industrial markets remain challenged, strong operational performance allows us to reaffirm our 2013 earnings guidance."

HXL closed Monday's regular trading session at $34.40, down $0.44 or 1.26% on a volume of 1.03 million shares.