a deeper look at cramer-recommended hexcel corporation - foot pads
Recently on cnbc TV show crazy money, Jim Kramer told Aerospace company Hexcel Corporation (NYSE:HXL).
I don't usually follow Cramer's advice and haven't really seen the TV show for years.
Cramer has had some good advice over the years, but his investment style doesn't match mine and the stock he mentioned is usually two expensive (price wise)
I have to lag behind as a small investor.
I have done some follow-up research on Hexcel over the last few days and have to say that I think Cramer is correct for Hexcel and I have to agree that the stock is buying.
Hexcel Corporation is the leader in aerospace parts, and according to Cramer, the company is currently in an optimistic seven-year cycle with the success of Airbus and Boeing (NYSE:BA)
Launch a new type of large commercial aircraft using Hexcel parts.
Cramer praised Boeing and Airbus for being the major contributor to Hexcel, the largest ever successful year for Hexcel in 2011 and the upcoming 2012 aircraft.
At present, 14% of the aircraft have Hexcel Products, and Cramer believes that this number may be 44% by 2017.
Cramer said the stock was cheap with a P/E ratio of 18 and a growth rate of 11%.
After comments from Cramer, I conducted a deeper study of the company, which was founded in 1946.
The Hexcel product line is large and available in many different industries, which surprised me and this is the first time I have heard about this company.
The company has products on aircraft, space shuttles, satellites, wind turbines, cars, bicycles, skis, golf clubs, fishing rods, surfboards and tennis rackets.
In cars, Hexcel Products and carbon fiber produced by the company can be found in projects such as car spoiler, door, roof, intake, dashboard, steering wheel and engine frame.
For Hexcel, the car market is not a big market at the moment, but as the government pushes legislation to drive cars with higher mileage per gallon, automakers will do everything they can to make their cars lightweight, a source of Hexcel Products.
I think car manufacturing may be as big as commercial aircraft for Hexcel in the future, and in the long run there will be a huge return for the company and shareholders.
The long-awaited release of the Boeing 787 Dreamliner is a huge boon for Hexcel.
The company produces composite products in aircraft window frames and doors at a cost of more than $1 per aircraft.
Hexcel's revenue is 5 million.
Boeing is three years away from the original scheduled delivery date of the first Dreamliner, but now it seems to be on track.
Boeing aims to produce 10 Dreamliners a month by the end of 2013.
According to Boeing, Boeing is expected to sell more than 3,300 Dreamliners by 2028.
In the next 16 years, Hexcel has earned nearly $5 billion in revenue from fantastic sales alone.
Hexcel's monthly revenue was $0. 18 billion by 2014.
Like the Boeing 787 Dreamliner, Hexcel Products can also be found on two other large commercial aircraft launched by Airbus.
Airbus's a380 and a350 rely on materials manufactured by Hexcel to keep their large aircraft lightweight.
Since several large airlines have already booked orders with them, rather than waiting for Boeing to deliver their products, the delayed release of Dreamliner is Airbus's gain.
Hexcel is in a good position because they make parts for both companies and Hexcel makes money as long as both companies have a huge backlog.
Hexcel has been producing products in the marine industry for 40 years.
Hexcel Products are available on the hull, deck, Keel, rudder, mast and sail.
Over the past 30 years, the railway industry has been blessed with Hexcel Products.
Items like the floor, doors and ceiling of the train compartment all have features made by Hexcel to help reduce weight.
As the train runs faster, they increasingly rely on Hexcel to provide light carbon fiber.
Market growth in the wind is not as strong as Hexcel used to be.
Vestas is the number one customer of Hexcel wind energy products.
If the increase in the wind energy initiative comes back, Hexcel will benefit from its carbon fiber wind turbines.
The 2010 annual report released by Hexcel shows a gross profit margin of 24.
1%, an increase over 22 years.
4%, also 21 of 08. 8%.
Hexcel's healthy gross profit margin helps increase earnings per share and also helps the company to confirm more than $77 million with 2010 free cash flow.
The company chose to pay off a portion of its debt with free cash flow and now has $215 in long-term debt, the lowest amount since 1996.
As companies pay off their debts and keep increasing free cash flow, it will not be impossible to acquire or pay dividends.
In the most recently released third quarter, net income doubled and revenue increased by 20%.
Analysts expect earnings of $0.
27 and Hexcel reported earnings per share of $0.
34 instead, 26% more than the number.
The earnings report was for the third consecutive quarter, with seven out of the last eight Earnings per share figures exceeding analysts' targets.
Analysts estimate earnings per share will hit $1 this fiscal year. 23 of which $0.
91 have been reported in the past three quarters.
Hexcel recently put forward its own guidance and said they expect to report $1 in revenue. 18 to $1. 23.
The price range they had previously predicted was $1. 05 to $1. 12.
Analysts hope to get $1 for the next fiscal year.
Reported earnings per share 38.
Hexcel recently listed its $1 earnings target. 33 to $1.
Fiscal 2012 45.
When trying to look at which stocks should be traded, it is important to look at the earnings for next year, as fiscal 2011 is the last quarter of the company.
Shares traded at 18.
Six times this year's earnings expectations.
When the same ratio applies to the mid-range $1 for the next few years.
The share price is $25.
But some of them may be priced in stocks.
I think the stock should be traded around 18 times next year's high yield expectations, which will bring the fair value to $26. 10.
This only means that the stock is undervalued by 12%, but I believe it is conservative and I think the stock will reach $30 by the end of 2012.
The stock traded for $22.
95. at the time of writing, the market value was $2. 26 billion.
The stock traded at $17. 33 to $26.
In the past 52 weeks, stock prices have been 13% lower than last year's highest.
The current balance sheet has $48 million in cash and $0. 249 billion in manageable debt (Yahoo Finance).
Shares reached $35 in 1988.
The company traded for less than $5 between 2002 and 2004, and then steadily climbed from $7 per share to $25 in the two years beginning 2007. The company re-
After the voluntary announcement of Chapter 11 on 1995, it broke out of bankruptcy on 1993.
Hexcel has a large share of mutual funds and currently owns 91% of the company's shares.
The three biggest holders are T. Rowe Price (NASDAQ:TROW)
Lord Abbett and the Vanguard, the bet is 6. 36%, 6. 16%, and 4.
The stock is the first trust Clean Edge Green Energy Index ETF (NASDAQ:QCLN)
The company is the fifth largest holding company with four.
Investment in Hexcel accounted for 8%.
When John Glenn first flew around the Earth with the company's products on the Friendship Seven capsule made in the 1960 s, Hexcel was present.
On 1969, before Neil Armstrong set foot on the moon, the Apollo 11 mat, manufactured by Hexcel, landed first.
I would like to thank Jim Kramer for putting this amazing company on my investment watch list.
When we end the whole year, I will consider buying stocks for myself, and if the price is right, I will also make the company one of my top ten stock options for 2012.
I think the $22 to $23 Range is a good time to lag behind Hexcel stocks.
Disclosure: I don't have a position in any of the stocks mentioned, but may initiate a long position in HXL within the next 72 hours.