Hexcel Corporation (NYSE: HXL) stock lost over 7.8% in the pre-market session of October 20th, 2020 (Source: Google finance) after the company posted lower than expected results for the third quarter of FY 20.
HXL in the third quarter of FY 20 has reported the adjusted loss per share of 29 cents, missing the analysts’ estimates for the adjusted loss per share of 7 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 35.9 percent to $286.90 million in the third quarter of FY 20, missing the analysts’ estimates for revenue by 17.40%. Gross margin for the third quarter had contracted to 4.7% compared to 27.6% in the prior year period. The decline is driven by the under absorption of fixed overhead from lower sales levels magnified by the temporary idling of select production assets and facilities during the period to align production with demand. Selling, general and administrative and R&T expenses for the third quarter of 2020 had fallen 26% than the prior year as ongoing realignment actions and headcount reductions reduce the cost structure. Other operating expenses mainly included the restructuring charge for the Windsor facility closure and additional severance costs across a number of facilities. The company reported negative adjusted operating income in the third quarter of 2020 of $21.8 million, or (7.6)% of sales, compared to $109.9 million, or 19.2% of sales in 2019.
Moreover, Commercial Aerospace segment sales decreased 66.6% (66.3% in constant currency) to $128.8 million for the third quarter compared to the third quarter of 2019. All major programs had fallen down substantially with the largest sales impact related to the A350. Boeing 737 MAX sales continue to be at a very low level. Build rate reductions driven by the COVID-19 pandemic combined with significant supply chain inventory destocking led to the reduced sales levels. Additional build rate reductions publicly announced at the end of July 2020 by Airbus and Boeing is further extending the impact of supply chain destocking. Space & Defense sales decreased 0.9% (0.5% in constant currency) to $108.8 million for the third quarter as compared to 2019. The small decline was due to lower demand from a number of European space & defense programs as aggregate U.S. space & defense sales were up moderately in the third quarter of 2020 compared to the third quarter of 2019.