Hexcel (NYSE:HXL – Get Free Report) and AAR (NYSE:AIR – Get Free Report) are both mid-cap aerospace companies, but which is the better business? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, profitability, valuation, earnings and analyst recommendations.
Profitability
This table compares Hexcel and AAR’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Hexcel | 6.07% | 11.08% | 5.66% |
| AAR | 5.46% | 12.39% | 5.68% |
Insider and Institutional Ownership
95.5% of Hexcel shares are owned by institutional investors. Comparatively, 90.7% of AAR shares are owned by institutional investors. 1.8% of Hexcel shares are owned by insiders. Comparatively, 3.6% of AAR shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Hexcel | 1 | 10 | 3 | 1 | 2.27 |
| AAR | 0 | 2 | 4 | 1 | 2.86 |
Hexcel currently has a consensus target price of $91.00, indicating a potential downside of 9.03%. AAR has a consensus target price of $131.20, indicating a potential downside of 0.95%. Given AAR’s stronger consensus rating and higher possible upside, analysts plainly believe AAR is more favorable than Hexcel.
Earnings and Valuation
This table compares Hexcel and AAR”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Hexcel | $1.94 billion | 3.89 | $109.40 million | $1.52 | 65.81 |
| AAR | $3.13 billion | 1.68 | $12.50 million | $4.51 | 29.37 |
Hexcel has higher earnings, but lower revenue than AAR. AAR is trading at a lower price-to-earnings ratio than Hexcel, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Hexcel has a beta of 1.08, indicating that its share price is 8% more volatile than the S&P 500. Comparatively, AAR has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500.
Dividends
Hexcel pays an annual dividend of $0.72 per share and has a dividend yield of 0.7%. AAR pays an annual dividend of $0.30 per share and has a dividend yield of 0.2%. Hexcel pays out 47.4% of its earnings in the form of a dividend. AAR pays out 6.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Hexcel has increased its dividend for 3 consecutive years. Hexcel is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Summary
AAR beats Hexcel on 10 of the 17 factors compared between the two stocks.
About Hexcel
Hexcel Corporation develops, manufactures, and markets carbon fibers, structural reinforcements, honeycomb structures, resins, and composite materials and parts for use in commercial aerospace, space and defense, and industrial applications. It operates through two segments, Composite Materials and Engineered Products. The Composite Materials segment manufactures and markets fabrics, multi-axials, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, structural adhesives, molding compounds, tooling materials, polyurethane systems, and laminates that are used in military and commercial aircraft, wind turbine blades, recreational products, and other industrial applications, as well as in automotive, marine, and rail transportation. The Engineered Products segment manufactures and markets aircraft structures and finished aircraft components, including wing to body fairings, wing panels, flight deck panels, door liners, rotorcraft blades, spars, and tip caps; and aircraft structural sub-components and semi-finished components used in rotorcraft blades, engine nacelles, and aircraft surfaces, such as flaps, wings, elevators, and fairings; and RF interference control products for military and aerospace applications. This segment also provides interference control materials, structural composites, and services; dielectric absorber foams; magnetic absorbers; and thermoplastics for commercial and defense applications. The company sells its products directly through its managers, product managers, and sales personnel, as well as through independent distributors in the Americas, Europe, the Asia Pacific, India, and Africa. Hexcel Corporation was founded in 1946 and is headquartered in Stamford, Connecticut.
About AAR
AAR Corp. provides products and services to commercial aviation, government, and defense markets worldwide. The Parts Supply segment leases and sells aircraft components and replacement parts. The Repair & Engineering segment provides airframe maintenance services, such as airframe inspection, painting, line maintenance, airframe modification, structural repair, avionics service and installation, exterior and interior refurbishment, and engineering and support services; component repair services comprising maintenance, repair, and overhaul (MRO) services, engine and airframe accessories, and interior refurbishment; and landing gear overhaul services, including repair services on wheels and brakes. This segment also develops specific aircraft components and parts; and designs proprietary designated engineering representative repairs. The Integrated Solutions segment engages in the fleet management and operation of customer-owned aircraft; provision of supply chain logistics services, such as material planning, sourcing, logistics, information and program management, and parts and component repair and overhaul services; and flight hour component inventory and repair services. In addition, the segment provides integrated software solutions comprising Trax, a cloud-based electronic enterprise resource platform, as well as a suite of paperless mobility apps for automating MRO workflows. The Expeditionary Services segment designs, manufactures, and repairs transportation pallets; and containers and shelters for military and humanitarian tactical deployment activities, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters, as well as engages in provision of engineering, design, and system integration services for specialized command and control systems. AAR Corp. was founded in 1951 and is headquartered in Wood Dale, Illinois.
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