Is Hexcel Setting Up for a Big Move? – September 16, 2021

Hexcel Corp. (HXL) designs and manufactures high-performance composites, including carbon fibers, for use in commercial aerospace, defense, and other industrial markets. The company operates under two segments: composite materials and engineered products.

The company has been dealing with the implications of the COVID pandemic as it has had to reduce its workforce and cut costs. The spread of the virus caused a decline in air travel. Its commercial aerospace sales fell 24.6% in the second quarter and the company continues to deal with the pandemic’s effect in its industrial sales.

As of the most recent quarter, the company only had $115 million in cash, but it also had no short-term debt. Sales have been down an average of 16.6% a year for the past three years and are expected to fall 3% year over year in the current quarter.

The stock is also overvalued with a forward P/E of 32.68. It had been trending higher from last fall into March, but performance has been mixed ever since. This is evident in the chart below.

HXL has settled into a sideways trading range over the past several weeks. The range’s resistance is at $60 (red), while the support area is around $53 (green). HXL appears to be rallying back to the top of the range, and at some point the stock will have to break out of it, one way or the other.

The possible long positions in the stock would be on a breakout above $60. The ideal short opportunity would be on a break below $53.

HXL shares were trading at $59.22 per share on Thursday morning, up $0.38 (+0.65%). Year-to-date, HXL has gained 22.13%, versus a 20.13% rise in the benchmark S&P 500 index during the same period.

Author: Christian Tharp