Hexcel NYSE: HXL reported higher second-quarter sales, margins and cash flow as commercial aircraft production rates increased, led by demand on wide-body programs including the Airbus A350 and Boeing 787.
Second-quarter sales totaled $529 million, up 8% from the prior-year period, while adjusted earnings per share were $0.66. Adjusted operating income rose to $74 million, or 13.9% of sales, from $54 million, or 11.1% of sales, a year earlier. Gross margin increased to 26.1% from 22.8%, reflecting higher production volumes, improved overhead absorption and price realization.
Chairman, CEO and President Tom Gentile said the company is benefiting from the commercial aerospace production ramp and expects operating leverage to continue improving as volumes rise.
“With the ramp-up in commercial aircraft production across all the major programs now firmly taking hold, our operating leverage continues to strengthen from higher volumes combined with strong execution from our team,” Gentile said.
Commercial Aerospace Drives Growth
Commercial aerospace sales rose 18.3% year over year to $346.6 million, representing about two-thirds of quarterly revenue. Growth was led by increased volume on the A350 and 787 wide-body programs. Narrow-body sales also rose, with increases on the Boeing 737 MAX, Airbus A320 and A220 programs.
Sales in other commercial aerospace increased 3.7%, driven by regional jets. Gentile said Hexcel typically ships materials four to six months before aircraft assemblers deliver planes, meaning the company manages its operations based on supply-chain production demand rather than reported OEM deliveries.
The company said it has firm Airbus orders through the end of 2026 supporting at least 80 A350 ship sets this year. Gentile said Airbus was producing between eight and nine A350 aircraft per month at the time of the Farnborough Airshow and that Hexcel sees potential upside to its 80-aircraft outlook based on purchase orders and continuing discussions with Airbus.
Hexcel said that if Airbus and Boeing reach their publicly stated peak production rates on major commercial aircraft programs, its existing contracts could generate approximately $500 million in incremental annual sales. The company said it was previously equipped to support an A350 production rate of 13 aircraft per month and retains that capacity, though higher rates could require additional investment.
Defense, Space and Industrial Results
Defense, space and other sales totaled $182.7 million, down 7% from the year-earlier quarter. Chief Financial Officer Jamie Coogan said the decline primarily reflected lower industrial revenue following the September 2025 divestiture of Hexcel’s Austrian industrial business and the wind-down of industrial operations at its Leicester, U.K., site.
Hexcel ceased industrial operations at Leicester effective June 30. The site had annual sales of about $15 million and will continue to support aerospace research and development projects.
Defense and space sales alone were unchanged from the prior-year quarter. Strength in U.S. and international fixed-wing programs, international helicopters and satellite sales was offset by temporary softness in launchers and rocket motors, according to Coogan.
Gentile said defense and space remains a priority organic-growth market, and the company expects defense, space, regional jets and business jets to provide about $200 million of incremental sales growth before the end of the decade. He said defense currently accounts for roughly 35% of sales and could eventually represent 40% to 50%, although commercial aerospace is expected to grow rapidly over the next several years.
Capacity, Margins and Cash Flow
To support higher demand in the second half and expected production-rate increases in 2027, Hexcel plans to accelerate hiring and restart a carbon-fiber line in Salt Lake City that had been idle during the pandemic. Gentile said the company has 14 carbon-fiber lines in Salt Lake City, four of which had been idled. Two were already restarted, and the company is bringing a third back online earlier than originally planned.
The company had originally planned to hire 400 employees during 2026 and had hired 300 by the time of the call. It expects to complete that plan in the second half while adding further hiring as demand increases.
Coogan said adjusted EBITDA for the first six months of 2026 increased 25% to $216 million, with an adjusted EBITDA margin of 21%, compared with $173 million and an 18.2% margin in the comparable period of 2025. The company is targeting an adjusted operating margin of 18% and an adjusted EBITDA margin of about 25% as production rates recover.
Free cash flow was $52 million in the first half, compared with a $47 million use of cash a year earlier. Net debt-to-last-12-month adjusted EBITDA improved to 2.3 times at June 30 from just under 2.7 times at the end of 2025. Hexcel said it remains focused on reducing leverage to its targeted range of 1.5 to 2.0 times during 2026.
Guidance Raised
Hexcel raised its full-year 2026 sales outlook to a range of $2.025 billion to $2.125 billion, from a prior range of $2 billion to $2.1 billion. It increased adjusted EPS guidance to $2.30 to $2.40, compared with previous guidance of $2.10 to $2.30.
The company maintained its outlook for free cash flow of more than $195 million and capital expenditures of less than $100 million. The higher sales outlook reflects expected upside in commercial aerospace, including the A350 and 737 MAX programs.
Management said the second half will include normal third-quarter seasonality, increased hiring costs, expenses associated with restarting the carbon-fiber line, and some conservatism regarding potential oil-price effects. Coogan said Hexcel’s hedging and procurement arrangements helped limit the effect of higher energy and acrylonitrile costs during the second quarter.
The company also declared a quarterly dividend of $0.18 per share, payable Aug. 17 to shareholders of record on Aug. 10.
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.
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