Why Is Spirit Aerosystems (SPR) Down 6.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Spirit Aerosystems (SPR). Shares have lost about 6.5% 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 Q1 Earnings Beat, Revenues Up Y/Y

Spirit AeroSystems reported first-quarter 2019 adjusted earnings of $1.68 per share, which surpassed the Zacks Consensus Estimate of $1.67. Year over year, the bottom line registered an improvement of 53% from $1.10 per share.

Barring one-time adjustments, the company reported GAAP earnings of $1.55 per share compared with $1.10 in the year-ago quarter.

Highlights of the Release

Total revenues of $1,968 million exceeded the Zacks Consensus Estimate of $1,940 million by 1.44%. Moreover, the top line rose 13% from $1,736 million on a year-over-year basis.

Backlog at the end of first-quarter 2019 was $48 billion, in line with the prior quarter’s number.

Segment Performance

Fuselage Systems: Revenues at the segment grew 11.1% to $1,069.6 million from $962.7 million registered in first-quarter 2018. Higher production volumes in the Boeing 737 and 787 programs in addition to higher revenues recognized for the Boeing 787 program activity drove the top line.

Propulsion Systems: The segment recorded revenues of $485.7 million in the reported quarter, up 23.1% from $394.5 million a year ago. The uptick can be attributed to higher production volumes and model mix in the Boeing 737 program, and higher revenues recognized for the Boeing 787 program.

Wing Systems: Revenues at the segment rose 8.2% to $407.9 million from $377 million in the prior-year quarter. The upside was primarily due to higher production volumes in the Boeing 737, 777 and 787 programs as well as higher wing deliveries for the Airbus A350 program.

Financial Position

As of Mar 28, 2019, Spirit AeroSystems had $1,228.4 million in cash and cash equivalents compared with $773.6 million as on Dec 31, 2018.

At the end of the first three months of 2019, long-term debt totaled $2,214.9 million compared with $1,864 million at the end of 2018.

Cash flow from operating activities increased to $242.2 million at the end of first-quarter 2019 from $166.6 million at the end of first-quarter 2018.

Capital expenditures summed $41 million during the first quarter, down from $48 million in the prior-year quarter.

Guidance

Management has announced that the company’s new guidance will be issued later, as the prior 2019 guidance did not reflect the 737 MAX production schedule changes.

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 -5.43% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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