Specialty composites maker Hexcel
This quarter was another challenging one -- something that's happened to Hexcel more than once before. Sales were up more than 5%, as reported, as double-digit growth in commercial aerospace offset significant weakness in its ballistics market. Gross margin improved slightly, and while reported operating earnings were down, adjusting out a host of expenses would reverse that to about 10% growth.
All that said, the bottom-line result missed analyst expectations by a fairly meaningful margin, for a less than impressive quarter.
But I'm very much inclined to say "so what?" The story here is really about the new Airbus A380 and Boeing
Of course, a lot can happen between now and then. Raw materials prices are an issue for Hexcel, as is a high fixed-cost base, though the latter could mean significant operating leverage if or when the order flow gets big enough. And it's also not impossible to think that some major global problem (like a high-profile terrorist attack) could lead to delays or cancellations of aircraft orders.
This is a tricky stock to value. Expensive relative to today's business, it may in fact prove to be rather attractively priced if the commercial aerospace cycle lives up to today's billing. This is a risky play, though, in a volatile and cyclical business. Fools had best keep those risks in mind, lest they find their portfolios hexed by unforeseen setbacks.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).