The aerospace industry, an intricate tapestry of innovation and opportunity, presents investors with an array of choices. While RTX (NYSE: RTX) has shone brightly, its star may have peaked after a staggering 47.5% surge fueled by robust commercial aerospace operations and meticulous rectification of manufacturing glitches.
Amid RTX’s stellar performance lies Hexcel (NYSE: HXL), an advanced materials company beckoning investors with promises of untapped growth.
The Evaluation of RTX’s Value
RTX’s success stems from its commercial aerospace endeavors. Despite commendable progress in addressing GTF engine issues and outperforming in the aerospace aftermarket, concerns loom over free cash flow guidance adjustments tied to defense business legal entanglements.
The plight of defense contractors coping with margin challenges on fixed-price programs, as echoed by Boeing and Lockheed Martin, underscores the industry’s predicament.
An Insight into Hexcel’s 2024 Struggles
Contrasting RTX’s glory, Hexcel faces a trying year marred by subdued advanced carbon fiber composites sales due to dwindling demand. With Airbus and Boeing scaling back delivery projections, Hexcel’s revenue forecast plunge of 19% in 2024 casts a gloomy shadow.
Indications of recouping its earlier revenue projections appear bleak as the Boeing worker strike prolongs, inviting further uncertainty on Hexcel’s future.
Image source: Getty Images.
The Potential of Hexcel’s Performance
While short-term risks loom ominously over Hexcel, brighter days beckon, anchored in two pivotal factors.
Firstly, as Boeing and Airbus pivot to bolster airplane deliveries, Hexcel stands to reap from future sales opportunities deferred rather than forsaken. With an existing backlog projected to yield $9 billion in future sales and Boeing outlining ambitious aircraft production blueprints, Hexcel emerges as a beacon of promise.
Secondly, amidst a backdrop of burgeoning composite materials adorning next-gen aircraft for enhanced fuel efficiency and emission targets, Hexcel’s growth trajectory aligns with the aviation industry’s evolution.
A Strategic Investment Play
While RTX bears merit for investors, a pang of overvaluation resonates amidst lingering margin doubts. In contrast, Hexcel’s allure lies in its forward-looking growth potential, ripe for harvesting amid temporary market turmoil.
Seizing a Lucrative Opportunity
For investors wary of missing the bus on lucrative stocks, Hexcel’s untapped potential beckons. Savvy investors are urged to capitalize on the opportunity before it eludes them.
*Stock Advisor returns as of October 7, 2024