Aerospace component manufacturer Hexcel (HXL +2.17%) has revealed it's getting a new CEO, initiating a leadership transition that caught investors off guard. The market generally hates surprises, and pushed shares of Hexcel down by 11% at the opening of Wednesday's trading session on the news.
A surprise change in the cockpit
Hexcel manufactures lightweight composite technologies that have become popular in aerospace, transportation, and energy markets. These materials have the strength of metals but are easier to customize, and their lower weights help improve the fuel efficiency of vehicles built with them.
Late Tuesday, Hexcel announced that Thomas C. Gentile III will take over as CEO on May 2. He will succeed Nick Stanage, who has agreed to remain as executive chairman of the board until year's end to assist with the transition.
In a statement, the company said that Stanage "worked closely with the board on his desire to retire," but Hexcel had not previously given investors any heads up that a change was coming. From 2016 to 2023, Gentile was CEO of Spirit AeroSystems, a company currently in the news because its issues have contributed to problems at Boeing.
NYSE: HXL
Key Data Points
Is Hexcel a buy on its CEO news?
Gentile comes with baggage, but during his tenure, long-troubled Spirit AeroSystems actually showed signs of improvement. And though the market doesn't like to be caught off guard, Stanage's willingness to stay on as executive chairman of the board for seven months should help ensure a smooth transition, and implies that there are no unstated reasons for the company to be making this leadership change.
Still, it might take time for Hexcel shares to recover from Wednesday's slide. This is a company that has historically traded at a premium thanks to its strong operational reputation, and investors might take a wait-and-see approach instead of assuming that Gentile will be able to continue what Stanage has established.
Hexcel also has lingering risks related to Boeing's troubles. The latest headlines surrounding the aerospace giant involve whistleblower complaints about the 787's manufacturing process. Should those complaints be substantiated, they could be a fresh blow to the reputation of the carbon composite aircraft, and raise questions about the viability of metal alternatives.
Given all the uncertainties, there's no reason to jump into Hexcel stock now.
