HEXCEL CORP /DE/ (HXL)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 net sales were $489.9M and adjusted diluted EPS was $0.50; GAAP diluted EPS fell to $0.17 due to a $24.2M restructuring charge tied to the Belgium facility closure and a $3.4M discrete tax charge .
• Results were broadly “in line with expectations”; Commercial Aerospace declined year over year driven by A350 and 787, while Defense, Space & Other grew high-single digits; guidance for FY 2025 was maintained, excluding tariff impacts .
• Versus consensus, Q2 revenue beat ($489.9M vs $476.4M*) and adjusted EPS beat ($0.50 vs $0.46*), while EBITDA was modestly below ($85.0M* vs $88.5M*)—reflecting underutilization and initial tariff headwinds .
• Near-term catalyst: management sees A350 destocking ending in Q3 and a “strong” Q4 as Airbus ramps build rates; defense momentum remains robust; tariff uncertainty remains the key external swing factor .

What Went Well and What Went Wrong

What Went Well

• Defense, Space & Other up +9.5% YoY (+7.6% cc) on CH-53K, international fighters, and space programs; continued strength expected into H2 .
• Sequential growth in three of four major commercial programs (737 MAX, 787, A320neo) and “Other Commercial Aerospace,” underpinning H2 leverage as rates rise .
• Supplier execution recognized: “Supplier Award for Best Performer from Airbus” for delivery and quality; management reiterated cost discipline and future-factory initiatives (automation, digitization, robotics, AI) to structurally cut unit costs .

What Went Wrong

• Commercial Aerospace down 8.6% YoY (8.9% cc); A350 softness due to Airbus rate reductions and European channel destocking (expected to end in Q3) .
• Gross margin compressed to 22.8% (from 25.3% YoY) on lower operating leverage and inventory actions; tariffs began to bite in Q2 .
• Engineered Products segment swung to an operating loss (-14.0% margin) on restructuring; negative YTD free cash flow (-$46.6M) and working capital use persisted in H1 .

Financial Results

Quarterly performance (sequential and YoY)

Q2 YoY comparison

Q2 2025 vs Wall Street consensus (S&P Global)

Values with * retrieved from S&P Global.

Market sales breakdown

Segment margins (reported)

KPIs and balance sheet snapshot

Guidance Changes

Management noted adjusted ETR for full year could be below 21% due to discrete items; tariff headwind expected at $3–$4M per quarter with uncertainty on pass-through timing .

Earnings Call Themes & Trends

Management Commentary

• “Hexcel delivered sales and adjusted EPS in line with expectations… with the exception being softness in the Airbus A350… and destocking of excess inventory” .
• “We expect this destocking to continue through the third quarter… Airbus… should end as we go into Q4… targeting… 12 aircraft per month on the A350 by 2028. The ship set for Hexcel on the A350 is between $4.5 million and $5 million” .
• “Our gross margin of 22.8%… was negatively impacted by lower operating leverage… [and] we are now beginning to feel the impact of tariffs” .
• “We are extremely confident… there is a great opportunity for Hexcel to generate strong incremental margins… We expect that we will generate over $1 billion of cash flow in the next four years” .
• “Once Airbus and Boeing hit their publicly announced peak build rates… Hexcel will see an additional $500 million in annual revenue” .

Q&A Highlights

• A350 cadence: shipping in “low 6s” in Q1 and “high 5s” in Q2; destocking largely in Europe; coupling with Airbus rates expected by Q4 and through 2026 .
• Defense outlook: budgets strengthening in U.S. and Europe (e.g., Rafale demand), with Hexcel positioning defense as a key growth vector .
• Tariffs: direct impact ~$3–$4M per quarter; FY pressure could be up to ~$10M; regional sourcing and pass-through/mitigation underway .
• Operating leverage: incremental margin expansion expected as 787, A320neo, 737 MAX move to higher rates and A350 restabilizes; strong Q4 implied .
• Restructuring cash timing: ~85–90% of the $24M Belgium charge to be cash, majority in Q3 .

Estimates Context

• Q2 2025 actual vs consensus: Revenue beat ($489.9M vs $476.44M*), EPS beat ($0.50 vs $0.46*), EBITDA slightly below ($85.0M* vs $88.53M*). Guidance maintained excludes tariffs, with management indicating EPS could bias to the lower end if full tariff impact materializes .
  Values with * retrieved from S&P Global.

Values with * retrieved from S&P Global.

Key Takeaways for Investors

• Near-term setup: Expect a softer Q3 on European seasonality and ongoing A350 destocking, then a stronger Q4 as Airbus ramps and destocking ends—supporting margin leverage .
• Defense resilience: Continued breadth across helicopters, fighters, and space provides a stabilizing and growing revenue base through H2 2025 .
• Tariff watch: ~$3–$4M per quarter headwind is not in guidance; EPS likely skews toward lower end if unmitigated; monitor pass-through and EU negotiations .
• Structural cost actions: Belgium closure reduces long-term Engineered Products cost base; future-factory initiatives (automation/digitization/AI) target unit cost reductions .
• Volume-driven upside: Synchronizing rates across A320neo/737 MAX/787/A350 can unlock significant incremental margin; OEM peak rate attainment implies ~$500M annual revenue uplift potential .
• Capital returns: Ongoing repurchases ($50.5M in Q2; $134M authorization remaining) and $0.17 dividend support TSR while M&A remains opportunistic and disciplined .
• FX hedge discipline: Current tailwind likely persists through 2025 given hedge layering; potential reversal in 2026 if dollar stays weaker .

Additional primary-source references:

• Q2 2025 earnings press release and exhibits (8‑K 2.02) .
• Q2 2025 earnings call transcript .
• Prior quarters for trend: Q1 2025 (8‑K 2.02) ; Q4 2024 (8‑K 2.02) .
• Other relevant press releases: Dividend declaration $0.17 (Jul 24, 2025) .