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Spirit Aerosystems (SPR) Up 1.5% Since Last Earnings Report: Can It Continue?

·4 min read

It has been about a month since the last earnings report for Spirit Aerosystems (SPR). Shares have added about 1.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Spirit Aerosystems due for a pullback? 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 Slump Y/Y

Spirit AeroSystems Holdings reported fourth-quarter 2020 adjusted loss of $1.31 per share, wider than the Zacks Consensus Estimates of a loss of 67 cents. In the fourth quarter of 2019, the company had reported adjusted earnings of 79 cents per share.

Barring one-time adjustments, the company incurred GAAP loss of $2.85 per share against earnings of 65 cents in the year-ago quarter.

For 2020, the company reported adjusted loss of $5.72 per share, which came in wider than the Zacks Consensus Estimate of a loss of $5.03. The full-year bottom line figure deteriorated from earnings of $5.54 recorded in 2019.

Highlights of the Release

Total revenues of $877 million missed the Zacks Consensus Estimate of $910 million by 3.6%. Moreover, the top line plunged 55% from $1,959 million in the year-ago period. The decline in revenues was primarily due to significantly lower 737 MAX production resulting from the program’s grounding and also due to the impacts of the COVID-19 pandemic.

For 2020, the company generated revenues worth $3.41 billion, which missed the Zacks Consensus Estimate of $3.46 billion by 1.4%. The full-year revenue figure also deteriorated 57% from the year-ago period.   

Backlog at the end of fourth-quarter 2020 was $34 billion, lower than $40 billion in the prior quarter.

Segment Performance

Fuselage Systems: Revenues in the segment declined 58.8% year over year to $426 million, primarily due to lower production volumes of Boeing 737 and 787 as well as Airbus A350 programs.

Propulsion Systems: The segment recorded revenues of $218.9 million in the reported quarter, down 58.9% from $532.3 million a year ago. The downside can be attributed to lower production volumes on the Boeing 737 program.

Wing Systems: Revenues in the segment deteriorated 44.6% to $216.4 million from $390.9 million in the prior-year quarter. The downside was primarily due to lower production volumes on the Boeing 737 and Airbus A320 and A350 programs.

Operational Highlights

Total operating costs and expenses declined 47.5% year over year to $978 million on account of lower cost of sales; decreased selling, general and administrative expenses; and reduced research and development expenses.

The company incurred an operating loss of $101.4 million in the fourth quarter of 2020 against operating earnings of $95.7 million in the prior-year quarter.

Financial Position

As of Dec 31, 2020, Spirit AeroSystems had $1,873.7 million in cash and cash equivalents compared with $2,350.5 million as of Dec 31, 2019.

At the end of 2020, long-term debt totaled $3,532.9 million compared with $2,984.1 million at the end of 2019.

Net cash used in operating activities came in at $744.9 million at the end of 2020 against net cash inflow of $922.7 million at the end of 2019.

Capital expenditures totaled $119 million during 2020, down from $232 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 -30.05% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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