A Member of Pat McKeough’s Inner Circle recently asked for his advice on a company that develops, manufactures, and markets lightweight, high-performance structural composite materials including carbon fibers, specialty prepregs, and honeycomb core structures.
Pat likes the firm’s entrenched, sole-source or primary-supplier position on the world’s most critical commercial aircraft platforms. It operates behind significant competitive moats with high barriers to entry and with commercial order backlogs at Boeing and Airbus stretching near a decade. However, Pat notes the firm’s direct vulnerability to original equipment manufacturer production snarls, regulatory delivery freezes, quality-control delays, or labour disruptions at Boeing and Airbus. The high P/E of 34.7times forecast earnings is nonetheless a key risk.
HEXCEL CORP. (Symbol HXL on New York) is a global leader in advanced lightweight composites technology. Its products include carbon fibre, specialty reinforcements and other resin-composite structures used in commercial aerospace, defence and space, and industrial applications.
In the quarter ended June 30, 2026, Hexcel’s revenue was $529.3 million, up 8.0% from $489.9 million a year earlier. Revenue rose due to rising build rates at commercial aerospace customers, which drove an 18.3% increase in sales for its Commercial Aerospace unit, led by volume growth in the Airbus A350 and Boeing 787 wide-body programs. This growth was partially offset by sales to defense, space and other markets, which decreased by 7.2% due to the previous divestment of Hexcel’s Austrian-based industrial business and the winding down of industrial operations at its Leicester, U.K. site.
Excluding one-time items, earnings were $50.2 million in the latest quarter, up 24.3% from $40.4 million a year earlier. Earnings increased because the higher sales volume generated stronger operating leverage through improved fixed-cost absorption. Due to fewer shares outstanding from previous share repurchases, earnings per share increased at a higher rate of 32.0%, to $0.66 from $0.50.
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Hexcel’s index inclusion could bring in new investors
The company has traditionally operated outside of the media limelight, although its recent inclusion in three leading indexes may change that.
Russell Indexes, on June 27, 2026, moved to add Hexcel’s stock to the Russell 1000 Growth Index, Russell 2500 Index, and Russell Midcap Growth Index. That should prompt institutions that mimic those indexes to buy the shares.
With the February 2026 payment, the company raised its quarterly dividend by 5.9%, to $0.18 a share from $0.17. The new annual rate of $0.72 yields 0.9%.
In addition to paying a dividend, Hexcel also repurchases its shares. In 2025, it repurchased $454.3 million of its stock, nearly double the $252.2 million bought back in 2024. It did not repurchase shares in the first half of 2026 and has $380.6 million left on its share repurchase program.
Meanwhile, the stock trades at a high 34.7 times the company’s forecast 2026 earnings of $2.40 a share.
Hexcel’s outlook is positive given its lightweight composites help airlines and defence agencies alike cut fuel costs. Still, the very high p/e adds risk.
Recommendation in Pat’s Inner Circle: Hexcel Corp. is okay to hold for aggressive investors.
