Hexcel's Margin Breakout Is Becoming Hard To Ignore

Hexcel Corporation demonstrates accelerating operating leverage, with Q2 sales up 8% and adjusted operating margin expanding 280 bps to 13.9%. HXL raises 2026 sales and EPS guidance, reflecting broadening commercial aerospace demand, particularly from Airbus A350 and Boeing 787 programs. Incremental margin reached 49% in Q2, and management targets mid-30% longer-term, as capacity is restored to meet rising demand. I downgrade from strong buy to buy, with a new price target of $125.31 (21% upside), as near-term upside moderates but multi-year margin and cash flow growth remain compelling.