On Monday, Stifel adjusted its outlook on Hexcel Corp . (NYSE: NYSE:HXL), a leading manufacturer of advanced composite materials for aerospace and industrial markets. The firm's analyst decreased the price target to $84 from $86 while reaffirming a Buy rating on the company's shares.
The decision to lower the price target comes after reviewing Hexcel's major programs across different segments. The analysis took into account the most recent production updates and their implications. The analyst noted that recent changes, particularly the revised delivery schedule from Airbus, might pose a slight headwind for Hexcel. This could potentially affect sales in the second half of 2024, with a possibility of impact extending into 2025, although the second quarter is expected to meet current expectations.
Despite the revisions, Stifel remains optimistic about Hexcel's long-term growth prospects. The firm anticipates a strong compound annual growth rate (CAGR) for Hexcel as it recovers, with the company likely to hit its investor day targets in 2027, a year later than previously forecasted. The pathway to commercial production ramps is described as increasingly uneven and weighted towards the latter part of the recovery period.
Furthermore, Stifel suggests that Hexcel's earnings potential from the present through 2026 and beyond appears to be undervalued in the current market valuation. This outlook underpins the firm's continued Buy rating, indicating a belief in the company's financial strength and market position despite near-term challenges.
InvestingPro Insights
In light of Stifel's recent rating on Hexcel Corp. (NYSE: HXL), real-time data from InvestingPro provides additional context for investors considering the company's financial position. Hexcel is trading at a significant earnings multiple with a P/E ratio of 53.17, which adjusts to 50.55 when considering the last twelve months as of Q1 2024. This high valuation comes at a time when the company's shares are trading near their 52-week low, potentially indicating a market undervaluation of its earnings potential.
On the upside, Hexcel's liquid assets exceed its short-term obligations, suggesting financial stability, and the company operates with a moderate level of debt. With a market capitalization of $5.2 billion and a revenue growth of 9.65% over the last twelve months as of Q1 2024, Hexcel appears to be maintaining a solid growth trajectory. Moreover, analysts predict the company will be profitable this year, supporting Stifel's optimistic long-term growth prospects for Hexcel.
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