Hexcel Q4 Earnings Call Highlights

Hexcel (NYSE:HXL) executives told investors the company is preparing for what they described as a sustained ramp-up in commercial aircraft production after a difficult 2025 marked by OEM destocking, schedule delays, and lingering supply chain constraints. On the company’s fourth-quarter and full-year 2025 earnings call, management pointed to rising commercial order activity late in the year and outlined a 2026 outlook that assumes improving build rates across key Airbus and Boeing programs.

Management points to improving commercial aerospace backdrop

Chairman, CEO and President Tom Gentile said industry conditions are supportive of elevated production rates over an extended period, citing IATA data showing a commercial aircraft backlog exceeding 17,000 and a delivery shortfall of at least 5,300 aircraft to date. Gentile argued that continued aircraft ordering even amid a historically high backlog reflects demand for newer, more fuel-efficient aircraft that rely on lightweight composite materials.

Gentile highlighted several program-specific developments he said support higher production over time:

• A350: Airbus bringing major A350 production in-house as part of the Spirit AeroSystems transaction, which management said removes a prior bottleneck.
• A320: engine supply improvements, including Safran expanding LEAP final assembly capacity (with record unit shipments in the fourth quarter) and Pratt & Whitney GTF shipments expected to rise further in 2026, along with two new Airbus A320 final assembly lines (U.S. and China).
• 787: Boeing breaking ground on an expansion at Charleston intended to double 787 output and transitioning toward eight aircraft per month, while noting inventory is “more normalized” as supply chain conditions improve.
• 737: Boeing producing at a rate of 42 aircraft per month after the FAA lifted a production cap.

Gentile said destocking experienced in 2025 appears “largely behind us,” though he noted the company will continue to monitor it in 2026.

2025 results reflect A350 schedule changes and portfolio actions

For full-year 2025, Hexcel reported sales of $1.894 billion, adjusted EPS of $1.76, and free cash flow of $157 million, with results impacted by Airbus-initiated A350 schedule changes and channel destocking. The year also included charges tied to disposing of non-core operations in Austria and Connecticut, and a facility closure in Belgium as the company rationalized its footprint.

In the fourth quarter, Hexcel reported sales of approximately $492 million (management also discussed fourth-quarter sales on a constant-currency basis). Commercial aerospace sales were roughly $300 million, with growth driven by the A320, plus higher 787 and 737 volumes and improved regional jet sales, partially offset by lower A350 volume due to lingering destocking. Defense, space, and other sales were about $192 million, down versus the prior year, which management attributed in part to the divestment of its Austrian industrial business that closed on Sept. 30, 2025.

Interim CFO Mike Lenz said the fourth quarter showed operating leverage as sales improved. Gross margin was 24.6%, down from 25% a year earlier due mainly to sales mix, while operating expenses fell to 11.4% of sales from 13% the year before. Adjusted operating income was $65 million, or 13.3% of sales, compared with $57 million, or 12.1%, in the prior-year quarter.

Lenz also called out foreign exchange as a headwind in the quarter, noting fourth-quarter 2025 operating margin was negatively impacted by about 110 basis points from FX, versus a favorable impact of about 60 basis points in the fourth quarter of 2024. He said the quarter’s FX comparison included settlement of certain short-term non-USD balances and should not be viewed as a run-rate effect into 2026, though the company expects FX headwinds in 2026 versus 2025.

Cost controls, headcount reductions, and capital return initiatives

Gentile emphasized cost control and operational discipline in response to the softer 2025 environment, including exiting industrial end markets such as wind energy and winter recreation. He also referenced a proposal to refocus the Leicester, U.K., site on commercial aerospace development work.

Hexcel ended 2025 with headcount about 330 positions lower than year-end 2024, driven by attrition and site rationalization. Gentile said the company is evaluating selective hiring early in 2026 to support increased A350 production, with broader hiring likely starting around mid-year.

On capital allocation, Gentile reiterated confidence in the recovery outlook and pointed to the company’s $350 million accelerated share repurchase initiated in October. Management said Hexcel intends to repay the revolver borrowings used to fund the ASR “as soon as possible” in 2026 and remains committed to a target leverage range of 1.5x–2.0x net debt to EBITDA. Lenz said year-end leverage was just under 2.7x following the revolver draw.

The board also approved a 6% increase in the quarterly dividend to $0.18 per share, payable Feb. 17 to shareholders of record Feb. 9. Gentile said that since the beginning of 2024, the company has returned over $800 million to shareholders through dividends and share repurchases.

2026 outlook and program assumptions

Hexcel guided for 2026 sales of $2.0 billion to $2.1 billion, adjusted EPS of $2.10 to $2.30, and free cash flow of more than $195 million. Gentile said increased operating leverage from higher volumes and continued cost discipline underpin the outlook, which he described as based on “prudent assumptions” for commercial rate ramps.

In Q&A, Gentile said commercial aerospace growth is expected to be low- to mid-double digits in 2026, while defense and space growth is expected to be low- to mid-single digits. He noted the company’s consolidated growth rate is tempered by the divestiture of the Austrian business (about $30 million of 2025 sales) and potential partial-year impact from Leicester (about $15 million of 2025 sales, with an estimated $8 million to $9 million impact discussed on the call depending on timing).

For key commercial programs, Gentile outlined unit assumptions used in planning, emphasizing that Hexcel, as a materials supplier, is typically 4–6 months ahead of OEM production timing. He said Hexcel is assuming:

• A350: about 80 units in 2026, versus 57 delivered in 2025, supported by bottom-up polling across roughly 35 Airbus-related locations and firm purchase orders extending through May.
• A320: “low to mid 700s” units, with Hexcel’s shipset value toward the upper end of its previously stated $200,000–$500,000 range.
• 737 MAX: “mid-400s,” with management citing lingering destocking as a watch item.
• 787: about 90–100 units, consistent with Boeing commentary referenced on the call.

Gentile also addressed profitability drivers, describing mid-30% incremental margins in the current plan and noting upside could come if commercial build rates exceed assumptions. He said Hexcel’s margin outlook is closely tied to operating leverage as the industry works back toward pre-pandemic production levels.

Separately, management said defense demand remains robust given rising budgets in the U.S. and allied nations, and the company is strengthening its defense team to pursue emerging opportunities, including higher-volume applications in areas such as unmanned systems and missiles. Gentile also said Hexcel is working with OEMs on next-generation aircraft manufacturing technologies, including out-of-autoclave approaches, faster layup and cure cycles, improved inspection methods, and other production system enhancements.

At the close of the call, Gentile noted lead director Jeff Campell plans not to stand for re-election after nearly 23 years on Hexcel’s board, including seven years as lead director.

About Hexcel (NYSE:HXL)

Hexcel Corporation is a global leader in advanced composite materials for aerospace and industrial applications. The company specializes in the development and manufacture of lightweight, high-performance products that enhance fuel efficiency, durability and structural strength. Its offerings are critical to the aerospace sector, where demand for lighter, more efficient aircraft drives continuous innovation in materials.

Hexcel’s product portfolio encompasses carbon fiber reinforcements, pre-impregnated composites (prepregs), honeycomb core, engineered adhesives and structural film adhesives.