The Next Couple Of Years Will Be Rough For Hexcel

Going into 2020, aerospace looked like one of the best markets to be in, and one of the relatively few markets where there really weren’t worries about underlying demand. In a few short months, Covid-19 has brought air travel to a standstill, threatened the survival of multiple airlines, and thrown the commercial aerospace market into chaos. As a supplier of advanced composites used in a range of aerospace applications, there’s really no place for Hexcel (HXL) to hide, and the next couple of years are going to be rough for this company.

Few companies offer up an easy modeling exercise today, but modeling Hexcel is complicated by the uncertainties regarding how the airline market will recover. Most likely, domestic demand will recover before international, driving a faster recovery in narrowbody aircraft versus the widebody aircraft where Hexcel is stronger. With that, I’m expecting it to take about five years for Hexcel to regain 2019 levels of revenue and cash flow, but patient and very risk-tolerant investors may yet want to take a look here.

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The Next Couple Of Years Will Be Rough For Hexcel