Executive Summary

Q1 2025 missed Street: revenue $456.5M vs $474.7M consensus* and adjusted EPS $0.37 vs $0.42 consensus*, on softer commercial aerospace volumes (notably 787 and MAX), an Engineered Products vendor quality issue, and a Decatur power outage impacting gross margin (22.4% vs 25.0% LY) .
Guidance cut: FY25 sales to $1.88–$1.95B (from $1.95–$2.05B), adjusted EPS to $1.85–$2.05 (from $2.05–$2.25), FCF to ~$190M (from >$220M), and capex < $90M (from < $100M); tax rate unchanged at 21% .
Why the guide-down: Airbus A350 shipset demand reduced from 84 to ~68 for 2025; A320 assumptions lowered by ~30 units; 787 softer start; tariffs excluded with direct impact estimated at ~$3–4M per quarter if implemented .
Capital and cash: $50.4M buybacks in Q1; $0.17 dividend declared; $300M 2035 notes issued and 2025 notes refinanced; Q1 FCF -$54.6M as usual seasonal cash use .
Potential stock catalysts: depth of A350 destock and 2Q–3Q volume trajectory, tariff policy clarity and pass-through dynamics, and defense/space offsets to commercial softness .

What Went Well and What Went Wrong

What Went Well
- Defense & Space growth despite macro: D,S&O market up 2.0% y/y (2.7% cc) with strength in CH-53K, Black Hawk, classified and space programs .
- Cost discipline and capital allocation: Capex trimmed for FY25; $50M buybacks in Q1; successful $300M refinancing “significantly oversubscribed” at attractive spreads .
- Management execution focus and recognition: Embraer “Best Supplier of the Year” award; “deliver, innovate, grow” priorities reiterated; capacity already installed for higher OEM rates .
- Quote: “Our gross margin… was negatively impacted by lower operating leverage… and a power outage in January… the plant is once again operating efficiently.”
What Went Wrong
- Commercial Aerospace softness: segment sales down 6.4% y/y (6.3% cc), driven by lower 787 and MAX; A350 nominally lower; gross margin fell 260 bps to 22.4% .
- Non-recurring and mix headwinds: vendor quality issue in Engineered Products; unfavorable mix; Decatur power outage cost $2–3M .
- Guide cut concentrated in A350: planned shipsets to Airbus reduced by ~16 units (84 → ~68), driving ~$76M revenue impact at $4.5–5.0M shipset midpoint .

Financial Results

Overall performance (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$456.5	$473.8	$456.5
GAAP Diluted EPS	$0.49	$0.07	$0.35
Adjusted Diluted EPS	$0.47	$0.52	$0.37
Gross Margin %	23.3%	25.0%	22.4%
Adjusted Operating Margin %	11.6%	12.1%	9.9%

Q1 2025 actual vs consensus

Metric	Actual	Consensus	Beat/Miss
Revenue ($M)	$456.5	$474.7*	Miss
Adjusted EPS	$0.37	$0.42*	Miss

Values with asterisks are retrieved from S&P Global consensus estimates.

Non-GAAP adjustments (Q1 2025)

+$0.01 EPS from “Other operating expense, net of tax” (Hartford divestiture loss) and +$0.01 from “Other expense, net of tax” (debt extinguishment costs) in the quarter .

Cash flow and balance sheet KPIs (Q1 2025)

KPI	Q1 2025	Q1 2024
Cash from Operations ($M)	($28.5)	($7.0)
Capex – cash ($M)	$26.1	$28.7
Free Cash Flow ($M)	($54.6)	($35.7)
Share Repurchases ($M)	$50.4	$100.7
Dividend per share	$0.17 declared	$0.15 (Nov-2024 declared)
Net Debt ($M)	$698.0	$575.3 at 12/31/24

Markets (Q1 2025 vs Q1 2024)

Market	Q1 2025 ($M)	Q1 2024 ($M)	y/y %
Commercial Aerospace	$280.1	$299.3	(6.4)%
Defense, Space & Other	$176.4	$173.0	2.0%
Total	$456.5	$472.3	(3.3)%

Segments (Q1 2025 vs Q1 2024)

Segment	Sales Q1’25 ($M)	Op Inc Q1’25 ($M)	Op Margin Q1’25	Sales Q1’24 ($M)	Op Inc Q1’24 ($M)	Op Margin Q1’24
Composite Materials	$365.3	$54.6	14.2%	$379.5	$63.7	15.8%
Engineered Products	$91.2	$5.1	5.6%	$92.8	$12.9	13.9%
Total	$456.5	$44.2	9.7%	$472.3	$52.9	11.2%

Guidance Changes

Metric	Period	Previous Guidance (Jan-22, 2025)	Current Guidance (Apr-21, 2025)	Change
Sales	FY 2025	$1.95B–$2.05B	$1.88B–$1.95B	Lowered
Adjusted EPS	FY 2025	$2.05–$2.25	$1.85–$2.05	Lowered
Free Cash Flow	FY 2025	>$220M	~ $190M	Lowered
Capex	FY 2025	< $100M	< $90M	Lowered
Effective Tax Rate	FY 2025	~21%	21%	Maintained
A350 material shipsets (assumption)	FY 2025	84 units (plan)	~68 units	Lowered
A320 assumption (units)	FY 2025	Prior plan	~30 units lower than prior assumptions	Lowered
Tariffs	FY 2025	Not contemplated	Excluded; potential direct impact ~$3–4M/quarter	Risk disclosure

Note: Management indicated implied FY25 margin profile in the ~11.5–12% range in Q&A (interpretation of updated guidance) .

Earnings Call Themes & Trends

Topic	Q3 2024 (Q-2)	Q4 2024 (Q-1)	Q1 2025 (Current)	Trend
Supply chain & OEM ramps	Continued disruptions; pulled mid-term guide; expect 2025 ramp but volatile	2025 guide based on conservative rate assumptions; MAX uncertainty; seasonality outlined	Commercial volumes below plan; A350/A320 reductions; Q2–Q3 most impacted	Deteriorated near-term
Tariffs/macro	Not a focus	Hedging/FX tailwind; R&D at 3% of sales	Tariffs excluded; direct impact ~$3–4M/quarter; many incoterms Ex Works/pass-through	New risk, manageable direct impact
Headcount/costs	Hired ahead of ramps; margin headwind	Staffed for 2025 ramps; ERP/MES expense $5–7M	Tight control; ~5% below plan; attrition, selective furloughs; cost-out projects	More aggressive cost control
Product/programs	Widebodies ~7/mo pulls; MAX variability	Program rate assumptions listed (A350, 787, A320, A220)	A350 shipsets cut; 787 delay 3–6 months; A320 lower; defense and biz jets resilient	Mixed: WB softer near-term
Defense & Space	Flat to soft in Europe; US strong	Growth in F-35/CH-53K; strong outlook	Growth in CH-53K, Black Hawk, space; international fighter program	Improving
R&D/technology	Innovation emphasis; future factory	R&T ~3% of sales; ERP/MES rollout	Dozens of lean projects; digitization/automation; continued R&T at ~3%	Sustained investment
Portfolio actions	Austria divestiture under review	Austria divestiture planned; Hartford to be sold	Hartford divestiture done; Austria sale ongoing; Belgium evaluation continues	Progressing
Capital allocation	$50M Q3 buyback; low capex	Dividend to $0.17; buybacks planned	$50M Q1 buyback; $300M notes due 2035; remaining authorization ~$184.5M	Ongoing returns

Management Commentary

“The underlying value proposition of Hexcel remains robust… However… continued supply chain driven delays in commercial aircraft production rate ramps, particularly on the Airbus A350… we are revising our 2025 guidance.” — Tom Gentile, CEO .
“Commercial aerospace sales were up nominally sequentially… 787 sales were significantly lower… Defense & Space grew… Within Industrial, Automotive grew… Wind weakened further.” — Tom Gentile .
“Gross margin… was negatively impacted by lower operating leverage… a power outage in January at our Decatur, Alabama facility… costing $2M–$3M.” — Patrick Winterlich, CFO .
“Direct [tariff] impact… about $3M to $4M per quarter… many incoterms… Ex Works… pass-through costs including tariffs.” — Tom Gentile .
“We built our plan… 84 A350 shipsets… now expect around 68… explains ~$76M of the $85M revenue guide reduction; A320 ~30 units lower adds ~$10M” — Tom Gentile .
“We repurchased $50M of stock in first quarter… successfully refinanced $300M… notes.” — Tom Gentile .

Q&A Highlights

Tariffs: Direct impact ~$3–4M per quarter; many contracts Ex Works or cost pass-through; indirect supply chain/OEM impacts uncertain and excluded from guidance .
Airbus A350/A320: 2025 A350 shipsets cut from 84 to ~68; A320 ~30 units below initial assumptions; A350 destocking acknowledged; capacity in place for future 12/mo target by 2028 .
Boeing programs: 737 assumed low 30s per month on average; 787 mid-80s deliveries, delay of 3–6 months vs initial plan .
Margins cadence: Q2–Q3 most impacted by A350; sequential improvement into year-end; implied FY25 margin ~11.5–12% .
Costs/capex: Headcount below plan via attrition; capex trimmed ~$10M across projects; ERP/MES expense ~$5–7M in FY25 .
Portfolio: Hartford 3D printing divestiture completed; Austria wind/recreation site sale ongoing; Belgium engineered core under evaluation .

Estimates Context

Q1 2025 vs S&P Global consensus: revenue $456.5M vs $474.7M*, adjusted EPS $0.37 vs $0.42* — both misses .
Prior quarter (Q4 2024) was essentially in line to slightly below on revenue ($473.8M vs $476.9M*) and in line on EPS ($0.52 vs $0.52*) .
With FY25 guidance cut, Street likely needs to lower outer-quarter estimates, especially for Q2–Q3 tied to A350 timing and mix; defense/space and sequential recovery into Q4 may partially offset .
Values with asterisks are retrieved from S&P Global consensus estimates.

Key Takeaways for Investors

Near-term pressure, mid-term capacity: Q2–Q3 likely the trough from A350/A320 adjustments; capacity and contracts position HXL for multi-year growth as Airbus/Boeing ramp and A350 targets 12/mo by 2028 .
Defense & Space is a ballast: Continued growth across CH-53K, Black Hawk, F-35, space programs; mixed industrial exposure remains a headwind (wind, recreation) .
Tariff risk manageable directly: ~$3–4M/quarter direct impact with pass-through levers; unknown indirect effects on OEMs warrant monitoring for estimate risk .
Cash returns intact with prudent spend: Buybacks ongoing ($50M Q1; ~$184.5M authorization remaining), dividend maintained at $0.17, capex reduced; leverage rising with refinancing but manageable .
Margin recovery hinges on volume: Operating leverage is the primary driver back toward high-teens margins over time; ERP/MES and “future factory” initiatives aim to offset inflation/mix .
Watch catalysts: Airbus monthly rate signals (A350, A320), Boeing 737 cap and 787 timing, tariff implementations and reciprocal actions, Austria divestiture progress, and defense order flow .

Appendix: Additional Press Releases in the Quarter

Dividend: Quarterly cash dividend of $0.17 per share declared (record May 2, payable May 9) .
Financing: $300M of 5.875% Senior Notes due 2035 priced to redeem 4.700% 2025 notes (refinancing completed) .

Values with asterisks are retrieved from S&P Global.

HEXCEL CORP /DE/ (HXL)·Q1 2025 Earnings Summary