Hexcel Corporation (HXL) benefits from its exposure to the growing commercial aerospace industry, a story which is expected to see sustained growth for years to come, says Chris Kapsch, Analyst at Topeka Capital Markets. He adds that, although the stock is currently trading at rich multiples, any event that pulls the price down can be considered as an opportunity to buy more shares.
“Hexcel is essentially a pure play on the sustainable strength in the commercial aerospace cycle, as well as a prime beneficiary of the increased content of carbon fiber in those commercial aerospace applications,” Kapsch said. “Any pullback in that particular stock, for example on the latest 787 fire — which appears unlikely to derail the 787 program — we would be viewing as a buying opportunity.”
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Kapsch says that, although HXL stock is trading at high multiples, he keeps his sight on the longer-term growth of the aerospace industry and the increasing content of carbon fiber in commercial aircraft.
“That story is sustainable for the balance of this decade, and while currently enjoying a rich multiple, it’s an earnings growth story that should clearly grow into and justify that multiple over the next several years,” Kapsch said.
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