(Reuters) - Hexcel's surprise appointment of the former top boss of troubled aerospace supplier Spirit AeroSystems as its new CEO spooked investors on Wednesday, sparking a 12% fall in its shares.
Hexcel, which supplies composite parts such as carbon fibers and structural adhesives to Boeing (NYSE:BA) and Airbus, said on Tuesday current chief Nick Stanage will transition to an executive chairman role and will retire at the end of the year.
"We note the surprising nature of this announcement as the company did not communicate to the market that it had been pursuing new leadership," BofA Securities wrote in a note, while downgrading the stock to "underperform" from "neutral".
Tom Gentile, who will take over as Hexcel CEO, stepped down from his role at Spirit Aero in October after a series of industrial challenges left the supplier struggling to stabilize cash flows. He had been the top boss of the company since 2016.
Spirit's shares declined more than 60% while he was the CEO. His tenure was marked by a series of supply chain challenges and production defects, most recently misdrilled holes on the Boeing 737 MAX aft pressure bulkhead.
The company has also been under regulatory scrutiny in recent months following the mid-air cabin panel blowout of a Boeing 737 MAX 9 jet, the fuselage for which was made by Spirit.
"We question whether his tenure with a heavily Boeing-related supplier will translate well to Hexcel, which has more business with Airbus," wrote Ken Herbert of RBC Capital Markets in a note.
Hexcel said Gentile's appointment as CEO and President followed a "comprehensive succession process". He is expected to assume the role on May 1 and be appointed to the board following the annual shareholder meeting on May 2.
Before the announcement, Hexcel shares had gained roughly 7% in the last 12 months. Its shares trade about 28.69 times their forward profit estimates, well below rival Spirit's 42.67 multiple.