- Ryan Beck notes that at the Farnborough Air Show, Airbus management stated that they hoped to make an announcement on the resolution of problems with wiring harnesses that were behind the earlier news of A380 production delays. The delays caused Hexcel (NYSE:HXL) to caution that 2H06 and 1H07 results could be impacted. Although Airbus management has not made an official announcement as of yet, an article in the September 8, 2006 edition of Flight International magazine reviews changes at Airbus in relation to the A380 workforce. About 1,200 people have been added to the program, and all 3,800 now involved in the program are working through the traditional European holiday break in August to rectify problems relating to the wiring harnesses and undertake other out-of-sequence work.
In relation to A380 delays, the firm recently surveyed a number of contractors and learned that Airbus has advised them to maintain deliveries as planned. This is not likely the case for all contractors; however, they believe the impact to HXL will depend on how many of its customers have been told to continue on schedule and how many have been advised to defer deliveries.
At the present time, they think it is premature to make any adjustments to forecasts. Firm's current estimates reflect the worst-case scenario presented by HXL management in June. If Airbus management decides to comment on the ramp-up in A380 production, they may have to revisit their forecast for an upward revision.
Maintains Outperform rating and $24 12-month price target based on an EV/EBITDA multiple of about 10x our forecast for 2007, which they believe is appropriate, as it is in the range for industrial materials companies, reflects the risks as we head toward 2008 and the opportunities for rapid growth as the aerospace business goes through a secular shift to composite materials. Firm continues to believe this is a 2008 story with a number of potential catalysts likely between now and then that could improve visibility and prospects for revenue and earnings growth.
Notablecalls: Considering HXL has been murdered partly because of A380 production delays one may consider picking up some stock here as the problems seem to be alleviating.
In relation to A380 delays, the firm recently surveyed a number of contractors and learned that Airbus has advised them to maintain deliveries as planned. This is not likely the case for all contractors; however, they believe the impact to HXL will depend on how many of its customers have been told to continue on schedule and how many have been advised to defer deliveries.
At the present time, they think it is premature to make any adjustments to forecasts. Firm's current estimates reflect the worst-case scenario presented by HXL management in June. If Airbus management decides to comment on the ramp-up in A380 production, they may have to revisit their forecast for an upward revision.
Maintains Outperform rating and $24 12-month price target based on an EV/EBITDA multiple of about 10x our forecast for 2007, which they believe is appropriate, as it is in the range for industrial materials companies, reflects the risks as we head toward 2008 and the opportunities for rapid growth as the aerospace business goes through a secular shift to composite materials. Firm continues to believe this is a 2008 story with a number of potential catalysts likely between now and then that could improve visibility and prospects for revenue and earnings growth.
Notablecalls: Considering HXL has been murdered partly because of A380 production delays one may consider picking up some stock here as the problems seem to be alleviating.
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