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- **Aerospace Recovery Accelerating**: A350 production target of 12/month by 2028 and 737 MAX ramp to 42/month by end-2025 underpin 2026 gross margin expansion to 18%. 
- **Defense Strength**: 11.7% YoY growth in Defense, Space & Other segment, led by F-35, Rafale, and CH-53K programs. 
- **Share Buyback Signal**: $600M buyback program reflects confidence in 2026+ production ramp and $1B+ free cash flow generation. 
- **Tariff Headwinds**: $3-4M/Q tariff impact expected to persist, but regional sourcing and pass-throughs being explored.

**【CEO Summary Section】**
- Hexcel sees a multiyear growth cycle in commercial aerospace, driven by rising production rates for key programs like the A350 (targeting 12/month by 2028) and 737 MAX (42/month by end-2025). 
- Gross margin expected to expand to 18% in 2026 as sales volume increases, offsetting $3-4M/Q tariff headwinds. 
- Defense, Space & Other segment grew 11.7% YoY, led by F-35, Rafale, and CH-53K programs. 
- $600M share buyback program announced, with $350M ASR executed to capitalize on inflection point in aerospace demand. 

**【CFO Financial Commentary】**
- Q3 2025 revenue $456M, flat YoY, with Commercial Aerospace down 7.3% due to destocking on A350 and 787. 
- Gross margin 21.9% (vs. 23.3% YoY), pressured by lower sales, tariffs, and inventory reduction. 
- Adjusted operating income $44.8M (9.8% of sales), down 15.3% YoY. 
- Free cash flow guidance: >$1B over 2025-2028, driven by operating leverage and cost control. 
- 2025 EPS revised to $1.75-$1.85 (from $1.95-$2.05) due to destocking and tariff impact. 

**【Q&A Highlights】**
- **Margins & Incrementals**: 200bps margin headwind from inflation absorbed in long-term contracts; 2026 incremental margins ~40%+ as production rates ramp. 
- **Inventory & Hiring**: 90-day inventory cushion to be reduced to 70 days; hiring to begin in Q4 2025 for 2026 production ramp. 
- **Tariffs & Pass-Throughs**: $3-4M/Q tariff impact expected to persist; working on regional sourcing and pass-throughs for mitigation. 
- **Defense Growth**: European defense spending up 18% Q3, driven by Rafale and Eurofighter programs; CH-53K multiyear deal with Lockheed to deliver 99 units by 2032.

Hexcel (HXL)-23 Oct 25-2025 Q3 Earnings call transcript

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