Spirit Aerosystems Up on Regular Investments Amid Cost Woes

We recently issued an updated research report on Spirit Aerosystems Holdings, Inc. SPR. The company’s fourth-quarter 2018 adjusted earnings of $1.85 per share surpassed the Zacks Consensus Estimate by 4%.

Total revenues came in at $1,835 million, which missed the Zacks Consensus Estimate of $1,858 million by 1.2%. Backlog at the end of fourth-quarter 2018 was $48 billion, in line with the prior year’s quarter.

Notably, Spirit AeroSystems is one of the largest independent non-OEM aircraft parts designers and manufacturers of commercial aerostructures in the world, in terms of annual revenues. The company is also the largest independent supplier of aerostructures to Boeing BA and Airbus (EADSY) — the two largest aircraft OEMs globally.

What’s Driving the Stock?

Spirit AeroSystems is currently focusing on executing its supply-chain strategy, improving productivity and meeting customers’ requirements for production rate changes. Additionally, the company strives to become more innovative by investing in technology and automation. These investments will be aimed at reducing costs, allowing the company to meet increasing production rates of its programs and ensuring its competitiveness for the next generation of aircraft.

In line with this, during the fourth quarter, the company unveiled its 3 and 4-axis center of excellence in McAlester, OK, and 5-axis center of excellence in Wichita. Moreover, the company began construction of its aerospace innovation center in Prestwick Scotland last year. This will enable the company to meet the increased production rates of 14 aircraft per month for 787 and 60 aircraft per month for Airbus’ A320.

However, the company continues to experience supplier disruptions and challenges related to model mix changes from the 737 NG to 737 MAX model, thanks to increased demand for Boeing’s 737 fleet of jets. Consequently, Spirit AeroSystems witnessed substantially higher costs in recent times, related to overtime, expedited freight and surge resources.

Spirit Aerosystems Holdings, Inc. Price and Consensus

Spirit Aerosystems Holdings, Inc. Price and Consensus | Spirit Aerosystems Holdings, Inc. Quote

Zacks Rank & Stocks to Consider

Spirit Aerosystems currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Teledyne Technologies Incorporated TDY and AeroVironment, Inc. AVAV. While Teledyne Technologies sports a Zacks Rank #1 (Strong Buy), AeroVironment carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Teledyne Technologies delivered an average earnings surprise of 10.65% in the last four quarters and has an estimated long-term earnings growth rate of 7.50%.

AeroVironment delivered an average earnings surprise of 294.51% in the last four quarters and has an estimated long-term earnings growth rate of 25%.

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