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The multiyear backlogs and support from Airbus and Boeing are expected to drive significant growth for this company for many years to come.
Anecdotal evidence and industry commentary point toward an ongoing ramp-up in aircraft production.
Shares in advanced composite materials company Hexcel (NYSE: HXL) were up by 15% as of 11 a.m. today. The move comes after its third-quarter earnings presentation. While third-quarter numbers and near-term guidance weren't anything to write home about, the company's future definitely is.
They may well end up as a trivia question along the lines of: Which company reported flat year-over-year sales, told investors it would be at the bottom of its full-year sales guidance, and lowered its earnings guidance for the full year, but still saw its shares up by a mid-teens percentage on the day? You obviously know the answer, but the deeper question is, why?
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It comes down to the fact that the aerospace supply chain appears to be easing in general, which means aircraft manufacturers Airbus and Boeing (both customers of Hexcel in their own right and via their suppliers) will find it easier to ramp up production.
That's excellent news for Hexcel, as it almost entirely relies on original equipment manufacturer (OEM) revenue; unlike many other aerospace suppliers, it has very limited aftermarket revenue. It's also something confirmed by engine manufacturer GE Aerospace recently, as it raised its expectations for engine production in 2025 on the back of increased availability of supply chain materials.
Image source: Getty Images.
Also note that Boeing recently received approval from the Federal Aviation Administration to ramp up 737 MAX production rates. According to Hexcel CEO Tom Gentile: "Looking forward to 2026, we are seeing strong orders from the commercial aerospace OEMs to support the production rate increases they are forecasting for their key programs. With the supply chain stabilizing, we are increasingly confident in the outlook for commercial aerospace original equipment build rates."
That bodes well for the future, and Hexcel remains one of the best stocks to buy in the aerospace sector.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace and Hexcel. The Motley Fool has a disclosure policy.
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