"Despite the recent economic slowdown, Hexcel (NYSE: HXL) is seeing its market for carbon-fiber-based aerospace products and parts boom," says energy sector expert Elliott Gue.

The contributing editor to Personal Finance explains, "And in addition to growing aerospace demand, the firm has growing markets in wind power and nuclear power." Here is his review.

"Hexcel makes lightweight carbon-fiber parts used on modern aircraft designs. New aircraft designs such as the 787 incorporate far higher carbon-fiber content than older planes, so Hexcel is becoming an increasingly important supplier.

"The aerospace demand cycle isn't directly tied to demand for air travel. Airlines and aircraft leasing firms typically plan their purchases of new planes many years in advance; the aerospace cycle is highly visible and longer-term in nature.

"Currently, demand for modern fuel-efficient aircraft such as the 787 Dreamliner from Boeing (NYSE: BA) is booming. Hexcel recently reported fourth quarter results and offered management's outlook for the year ahead. Just over 50% of the company's total sales come from the commercial aerospace market.

"The market is booming: Sales surged more than 21% compared to the fourth quarter of 2006 in constant dollar terms. Hexcel sells to both Airbus and Boeing which have a combined acklog of nearly 7,000 planes that have been ordered but not yet delivered.

"At current production rates it'll take at least seven years to build all those planes. These are firm orders; even if the economy continues to slow, the aircraft manufacturers will be busy filling orders they've already taken. This spells a steady stream of business for Hexcel.

"Consider that only 11% of Boeing's order book is from US carriers. Strong demand from emerging markets has been the growth driver for aerospace in recent years. The pace of orders isn't likely to slow appreciably due to a US economic slowdown.

"There's a global shortage of aircraft-certified carbon-fiber producers globally; it takes two to three years after a new carbon-fiber plant is built to certify the product as aerospace quality. This complex certification process limits potential competition for Hexcel.

"And the Hexcel story is far more than just airplanes. Industrial sales make up about a quarter of Hexcel's business. The growth driver in this market is wind power. Sales of carbon-fiber components for wind turbines soared more than 15% last year and could actually accelerate in 2008 as Hexcel opens new carbon-fiber production facilities in China and Europe.

"Hexcel also recently announced a new market for industrial demand: nuclear power. The company won a contract with US enrichment giant USEC for carbon-fiber rods used in the enrichment process. Management believes that this order could eventually offer $40 million in annual sales."

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