StockStory Flags Hexcel as Promising Industrials Stock Amid Sector Decline
StockStory has identified Hexcel (NYSE:HXL) as an industrials stock with promising prospects, while flagging Ingersoll Rand (NYSE:IR) and D.R. Horton (NYSE:DHI) as risky positions. The analysis comes as the industrial sector has tumbled by 7.2% over the past six months, a divergence from the S&P 500's 12% return during the same period. StockStory attributes this bearish outlook to volatile macroeconomic factors, specifically interest rates, which influence capital spending and demand.
StockStory has identified Hexcel (NYSE:HXL) as an industrials stock with promising prospects, while flagging Ingersoll Rand (NYSE:IR) and D.R. Horton (NYSE:DHI) as risky positions. The analysis comes as the industrial sector has tumbled by 7.2% over the past six months, a divergence from the S&P 500's 12% return during the same period. StockStory attributes this bearish outlook to volatile macroeconomic factors, specifically interest rates, which influence capital spending and demand.
Hexcel, which manufactures lightweight composite materials primarily for the aerospace and defense sectors, is highlighted for its projected revenue growth of 10.6% for the next 12 months. This projection indicates that demand is expected to rise above the company's two-year trend. The company, founded shortly after World War II by a group of engineers from UC Berkeley, saw its annual earnings per share increase by 44.8% over the last five years, a rate that exceeded its revenue growth due to share repurchases. Additionally, free cash flow margin expanded by 7.9 percentage points over the last five years, providing flexibility for investments and share buybacks or dividends. Hexcel's market cap stands at $6.51 billion, and its stock price of $86.13 per share implies a forward P/E ratio of 32.1x.
Ingersoll Rand, which provides air, gas, liquid, and solid flow creation solutions, is cited as a stock investors should think twice about including in a portfolio. Organic sales performance over the past two years suggests the company may need to make strategic adjustments or rely on mergers and acquisitions to catalyze faster growth. Earnings growth underperformed the sector average over the last two years, with earnings per share growing by just 3.2% annually. Low returns on capital reflect management's struggle to allocate funds effectively. Ingersoll Rand has a market cap of $30.63 billion and trades at $78.95 per share, or 21.5x forward P/E.
D.R. Horton, one of the largest homebuilding companies in the U.S., is described as a bearish pick. The company's backlog has dropped by 3.6% on average over the past two years, suggesting it is losing orders as competition increases. Falling earnings per share over the last two years has raised concerns among investors, as stock prices ultimately follow earnings per share over the long term. Diminishing returns on capital suggest that earlier profit pools are drying up. D.R. Horton has a market cap of $37.89 billion, and its stock price of $135.76 implies a valuation ratio of 12.4x forward P/E.