Hexcel (HXL) Jefferies Global Industrials Conference 2026 summary

Market recovery and production outlook

• Commercial aerospace production rates are recovering, with wide-body aircraft still below pre-pandemic peaks but expected to reach 12 A350s per month by 2028, driving significant revenue growth.

• Hiring and production line restarts have been accelerated to meet rising demand, with 400 new hires already onboard and additional lines coming online ahead of schedule.

• Operating leverage from higher production rates is expected to generate $700 million in incremental annual revenue over the next 3-4 years, supporting a 10% growth rate.

• Margins are projected to return to pre-pandemic levels of 18% as production scales, with CapEx remaining below $100 million annually for the next five years.

• A replenishment cycle for aging wide-body fleets is anticipated to sustain high production rates well into the next decade.

Supply chain, pricing, and cost management

• Confidence in OEM production rates has increased due to firm purchase orders and detailed demand surveys, especially for Airbus programs.

• Restarting mothballed carbon fiber lines incurs minimal CapEx, with some short-term margin pressure from hiring and ramp-up costs, but is expected to drive higher margins in 2027-2028.

• Long-term supplier contracts and hedging strategies through 2030 help mitigate raw material and fuel cost inflation.

• Pricing is reset on 15-20% of contracts annually, with Airbus contracts representing 40% of revenue and expiring in 2030.

• Inflation has created a 200 basis point margin headwind, but full production targets are expected to restore margins to 18% by 2028-2029.

Next-generation aircraft and R&D

• Composite content in next-generation narrow-body aircraft is expected to double, with carbon fiber wings and potentially fuselages, increasing ship set value to $1.5-$2 million.

• Only three companies globally supply aerospace-grade carbon fiber, with significant R&D underway to optimize fiber, resin, and production systems.

• Material systems for future aircraft will be more varied and tailored to specific parts, with faster curing and more efficient production processes.

• R&D spending is increasing to about 3.25% of revenue, focusing on new materials, thermoplastics, and high-temperature applications.