Hexcel Corporation (HXL, Financial), known for its lightweight components for aircraft, space, and defense, is experiencing a significant drop in share price following the announcement of a leadership change. Tom Gentile is set to become the new CEO, succeeding Nick Stanage on May 1, who will move to an Executive Chairman role. Despite reaffirming its FY24 guidance, with expected EPS of $2.10-$2.30 and revenue projections between $1.925-$2.025 billion, investor confidence seems shaken.
The reasons behind today's sell-off include:
- The announcement was unexpected, as Hexcel had not previously indicated plans for a leadership transition, causing market uncertainty.
- Concerns arise from Tom Gentile's previous role as President and CEO of Spirit AeroSystems (SPR, Financial), a company facing significant challenges, including its close ties with Boeing (BA, Financial) which recently announced its own management changes.
- Investigations into SPR by the Texas Attorney General and FAA audits have raised questions about whether Gentile's move to HXL might bring similar issues.
- However, Gentile's extensive experience in the aerospace industry could benefit Hexcel, especially in its Commercial Aerospace segment, which is a key supplier to both Boeing and Airbus (EADSY, Financial).
Despite initial concerns, it's worth noting that Gentile's leadership saw SPR performing well before the pandemic and Boeing's subsequent troubles. The leadership change at HXL, while surprising, could bring long-term benefits, especially as the demand for narrowbody planes remains strong and production issues are resolved.
