Spirit Aerosystems (SPR) Down 46.9% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Spirit Aerosystems (SPR). Shares have lost about 46.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Spirit Aerosystems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Spirit AeroSystems Q4 Earnings Miss, Revenues Up Y/Y

Spirit AeroSystems reported fourth-quarter 2019 adjusted earnings of 79 cents per share, which lagged the Zacks Consensus Estimate of $1.57 by 49.7%. The bottom line also plunged 57% from the year ago quarter’s earnings of $1.85.

Barring one-time adjustments, the company reported GAAP earnings of $1.68 per share compared with $1.07 in the year-ago quarter.

For 2019, Spirit AeroSystems’ earnings came in at $5.54 per share, which declined 12% from the prior-year’s earnings of $6.26.

Highlights of the Release

Total revenues of $1,959 million exceeded the Zacks Consensus Estimate of $1,926 million by 1.7%. Moreover, the top line rose 7% on a year-over-year basis.

Backlog at the end of fourth quarter 2019 was $43 billion, compared to the backlog of $48 million at the end of fourth quarter 2018.

For 2019, Spirit AeroSystems generated revenues of $7,863 million, which improved 9% from the prior-year’s revenue of $7,222 million.

Segment Performance

Fuselage Systems: Revenues at the segment grew 1.7% to $1,034.5 million from $1017.4 million registered in fourth-quarter 2018. Higher production volumes on the Boeing 787 and increased GCS&S activities drove top-line growth.

Operating margin for the fourth quarter of 2019 decreased to 5.8%, compared to 15.6 %during the same period of 2018.

Propulsion Systems: The segment recorded revenues of $532.3 million in the reported quarter, soaring 20.2% from $442.9 million a year ago. The uptick can be attributed to higher production volumes on the Boeing 737, 777 and Airbus A220 programs as well as favorable model mix on the Boeing 737 program.

Operating margin for the fourth quarter of 2019 increased to 18.7%, compared to 18% during the same period of 2018.

Wing Systems: Revenues at the segment rose 4.4% to $390.9 million from $374.4 million in the prior-year quarter. The uptick can be attributed to higher production volumes on the Boeing 787 and Airbus A350 programs.

Operating margin for the fourth quarter of 2019 decreased to 10%, compared to 16.1% during the same period of 2018.

Operational Highlights

Total operating expenses rose 17.1% year over year to $1,863.6 million on account of higher cost of sales, selling, general and administrative as well as higher research and development expenses.

The company’s operating income plunged 60.7% in the fourth quarter to $95.7 million from the year-ago quarter’s $243.6 million.

Financial Position

As of Dec 31, 2019, Spirit AeroSystems had $2,350.5 million in cash and cash equivalents compared with $773.6 as of Dec 31, 2018.

At the end of 2019, long-term debt (excluding current portion) totaled $2,984.1 million compared with $1,864 million at the end of 2018.

Cash flow from operating activities increased to $922.7 million at the end of 2019 from $$769.9 million at the end of 2018.

Capital expenditures summed $232 million in 2019 compared with $271 million in the prior year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -361.65% due to these changes.

VGM Scores

At this time, Spirit Aerosystems has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Spirit Aerosystems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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