Bank of America Securities analyst Ronald Epstein reiterated a Sell rating on Hexcel (HXL – Research Report) today and set a price target of $60.00.
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Ronald Epstein’s rating is based on several challenges Hexcel is currently facing. The company is navigating a difficult production ramp-up, primarily due to issues with OEM master schedules, which were further exacerbated by a Boeing strike affecting the 737 production line. This disruption has resulted in squeezed margins for Hexcel and a modest revenue growth outlook for 2025. The production limits on key programs, such as the 737 and widebody aircraft, are expected to persist, thus constraining Hexcel’s operational flexibility.
Additionally, Hexcel’s ability to expand margins is hindered by slow progress in widebody production, with key programs like the A350, 787, and 777 continuing at low production levels. The company’s operational inefficiencies, stemming from long lead times and excess staffing, further compound the issue. While Hexcel’s defense sector shows growth, it is overshadowed by a downturn in industrial markets. M&A could be a potential strategy to mitigate risks, but high margin compression and a challenging valuation environment make it difficult to execute effectively.