HEXCEL CORP /DE/ Q2 FY2024 earnings call

Tom Gentile joined as CEO and President, discussed second quarter results with sales up over 10% YOY and EPS at $0.60. Reiterated midterm outlook for commercial aircraft despite soft second half 2024. Highlighted sustainability efforts like partnership with Fairmat for recycling, Project Alta in advanced air mobility. Mentioned share repurchases with $201.8M year-to-date. Emphasized safety and operational excellence in factories, with focus on continuous improvement, digitization, and future factory initiatives.

The Composite Materials segment represented 82% of total second quarter sales and generated an operating margin of 17.2%. The Engineered Products segment, which is comprised of our structures and engineered core businesses, represented 18% of total sales and generated a 14.1% operating margin. Commercial Aerospace sales were up more than 21% year-over-year. Space & Defense sales increased 1.4% from the same period in 2023. Industrial sales increased 21.8% compared to the second quarter of 2023.

Revised 2024 guidance: sales $1.9 billion to $1.98 billion (previously $1.925 billion to $2.025 billion), adjusted diluted earnings per share $2.02 to $2.18 (previously $2.10 to $2.30), free cash flow around $200 million (previously greater than $200 million). Midterm guidance remains unchanged based on strong air traffic recovery and backlog.

Challenges in aerospace supply chain with Airbus reducing deliveries and Boeing deliveries below plan. Potential impact of strikes, though not built into guidance. Supply chain instability affecting second half 2024 outlook.

Q: Sheila Kahyaoglu from Jefferies asked about profitability and midterm guidance.

A: Tom Gentile said midterm guidance remains but second half 2024 is softer due to supply chain.

Q: Myles Walton from Wolfe Research asked about Airbus announcement and Leonardo pause.

A: Tom Gentile said it was all of the above, considering multiple demand signals.

Q: Gautam Khanna from TD Cowen asked about Boeing and Airbus program rates.

A: Tom Gentile said MAX is in low 30s, 787 in 5-6 range, and guidance reflects market signals.

Q: Bert Subin from Stifel asked about Industrial segment and defense.

A: Tom Gentile said Industrial's wind declined, automotive strong; defense midterm outlook still strong.

Q: Matthew Akers from Wells Fargo asked about facility operations and Industrial end markets.

A: Tom Gentile said ongoing continuous improvement and automation; Industrial wind declined, automotive key.

Q: John McNulty from BMO Capital Markets asked about cash flow and Commercial Aerospace slowdown.

A: Tom Gentile said second half 2024 softer but 2025 and beyond strong.

Q: Gavin Parsons from UBS asked about visibility and labor efficiency.

A: Tom Gentile said strong dialogue with customers, labor efficiency reflected in margin.

Q: Scott Mikus from Melius Research asked about Boeing strike and M&A.

A: Patrick Winterlich said no strike in guidance; Tom Gentile said focused on organic growth.

Q: Steve Strackhouse from RBC Capital Markets asked about build rates and supply chain.

A: Tom Gentile said strong dialogue with customers; Patrick Winterlich noted Hexcel's position in supply chain.

Q: Peter Skibitski from Alembic Global asked about storms and M&A.

A: Tom Gentile said no material issues from storms; focused on organic growth.

Q: Michael Ciarmoli from Truist Securities asked about midterm outlook and cash flow.

A: Tom Gentile said midterm outlook strong; Patrick Winterlich said cash conversion outlook remains.

Q: Richard Safran from Seaport Research Partners asked about M&A.

A: Tom Gentile said disciplined approach to M&A, focused on organic growth.

Q: Noah Poponak from Goldman Sachs asked about inventory and MAX production.

A: Tom Gentile said OEMs smoothing production, no massive destocking risk.