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Spirit AeroSystems (SPR) Q2 Earnings: Is a Beat in Store?

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Spirit AeroSystems Holdings, Inc. (SPR - Free Report) , a designer and manufacturer of aerostructures for both commercial and defense aircraft, is set to release second-quarter 2017 results on Aug 02 before the opening bell.

In the preceding quarter, the company’s earnings came in line with the Zacks Consensus Estimate. However, Spirit Aerosystems outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 2.73%.

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

Why a Likely Positive Surprise?

Our proven model shows that Spirit AeroSystems is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates, and Spirit AeroSystems has the right mix.

Zacks ESP: Earnings ESP for the company is +3.33 %. This is because the Most Accurate estimate stands at $1.24, higher than the Zacks Consensus Estimate of $1.20. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Spirit AeroSystems carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Factors at Play

Growing global demand for commercial airplanes is expected to boost sales of large aerostructures and components offered by Spirit AeroSystems. Moreover, the company’s long-term contracts with industry bellwethers like Boeing and Airbus Group should help boost revenues.

During the first-quarter earnings call, Spirit AeroSystems announced that it is poised to ramp up the production rate on the Boeing 737 program from 42 airplanes per month to 47 per month, before the end of the second quarter. We may get further updates on this program once the company releases its results.

On the flip side, Spirit AeroSystems incurred abnormal operating expenses of $12.1 million in fourth quarter of 2016 as well as additional expenses of $10.8 million in the first quarter of 2017. Management expects some residual expenses from these to weigh down on the company’s second-quarter results, which, in turn, may mar its growth trajectory.

For the second quarter, the Zacks Consensus Estimate for earnings per share reflects a 0.53% year-over-year decline, while sales are anticipated to be down 5.90% to $1.72 billion.

Other Stocks that Warrant a Look

Here are a few other defense stocks worth considering on the basis of our model, which shows that they have the right combination to pull off a beat.

Transdigm Group Incorporated (TDG - Free Report) is expected to report quarterly results on Aug 8. The company has an Earnings ESP of +1.01% and a Zacks Rank #2.

Leidos Holdings, Inc. (LDOS - Free Report) is expected to report quarterly results on Aug 3. The company has an Earnings ESP of +1.30% and a Zacks Rank #3.You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report quarterly results on Aug 3. The company has an Earnings ESP of +4.96% and a Zacks Rank #2.

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