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Will 787 Production Aid Spirit AeroSystems (SPR) Q1 Earnings?

Zacks Equity Research

Spirit Aerosystems Holdings, Inc. SPR is set to release first-quarter 2019 results on May 1, before the opening bell.

Increased segmental revenue expectations should boost the company’s first-quarter earnings. In the last reported quarter, the company delivered a positive earnings surprise of 3.93%.

Let’s see how things are shaping up prior to this announcement.

Fuselage Systems Likely to Drive Growth

Spirit AeroSystems’ Fuselage Systems segment, which represents more than 50% of its total sales, has continued to be a major growth driver for the company. Historically, revenues at this segment have been driven by increased production of Boeing 737 and Airbus A350 jets. Unfortunately, two fatal crashes caused the subsequent grounding of Boeing BA 737 jets worldwide, resulting in poor delivery figures for this model in the first quarter.

However, the demand for A350 remains high and solid production of these jets is expected to boost the Fuselage Systems segment’s top line in the soon-to-be-reported quarter. In fact, in November 2018, the company completed a new 11,000 square foot Trim & Drill expansion facility to support the A350 XWB program. This facility will enable the company to produce more fuselage systems.

Considering these developments, the Zacks Consensus Estimate for the segment’s first-quarter sales, pegged at $1,006 million, indicates a 4.5% rise from the year-ago quarter’s $963 million.

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise | Spirit Aerosystems Holdings, Inc. Quote

Other Factors at Play

With Boeing’s 787 production rate increasing to 14 aircraft per month from 12 since the beginning of 2019, Spirit AeroSystems’ Propulsion Systems segment is expected to witness revenue growth in the soon-to-be-reported quarter. In line with this, the Zacks Consensus Estimate for the segment’s first-quarter sales, pegged at $499million, suggests growth of 26.3% from the prior-year quarter figure.

In fact, all the three business segments of the company are expected to deliver solid performances in the first quarter, including the Wing Systems segment. As a result, the Zacks Consensus Estimate for Spirit AeroSystems’ first-quarter revenues, pegged at $1.94 billion, implies an 11.7% improvement from the prior-year quarter number.

Backed by these above-mentioned tailwinds, the company is anticipated to witness solid bottom-line growth in the to-be-reported quarter. Moreover, the company continues to focus on its cost reduction initiatives, which in turn may result in robust earnings.

For Spirit AeroSystems’ first-quarter earnings, the Zacks Consensus Estimate stands at $1.67 per share, indicating an annual rise of 51.8% from the year-ago quarter figure.

However, margins are expected to remain under pressure in the first quarter as the company is trying to ramp up inventory.

What the Zacks Model Unveils

Our proven model does not conclusively show that Spirit AeroSystems is likely to beat earnings in the first quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Spirit AeroSystems has an Earnings ESP of -2.01% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some companies in the Aerospace sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Curtiss Wright Corporation CW is set to report first-quarter 2019 results on May 8. The company has an Earnings ESP of +0.57% and a Zacks Rank #3.

Huntington Ingalls Industries, Inc. HII is scheduled to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +1.93% and a Zacks Rank #3.

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The Boeing Company (BA) : Free Stock Analysis Report
 
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