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Why Is Spirit Aerosystems (SPR) Down 1.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Spirit Aerosystems (SPR - Free Report) . Shares have lost about 1.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Spirit AeroSystems Q2 Earnings Miss, Revenues Down Y/Y

Spirit AeroSystems Holdings, Inc. reported second-quarter 2020 adjusted loss of $2.28 per share, wider than the Zacks Consensus Estimates of a loss of $1.19. In the previous year’s second quarter, the company reported adjusted earnings of $1.71 per share.

Barring one-time adjustments, the company reported a GAAP loss of $2.46 per share against the earnings of $1.61 in the year-ago quarter.

Highlights of the Release

Total revenues of $644.6 million missed the Zacks Consensus Estimate of $806 million by 20%.

Moreover, the top line plunged a massive 68% from $2,016 million in the year-ago period. The decline in revenues was primarily due to the significantly lower 737 MAX production, resulting from the grounding of the program, and the impacts of COVID-19.

Backlog at the end of second-quarter 2020 was $41 billion, lower than $42 billion in the prior quarter.

Segment Performance

Fuselage Systems: Revenues in the segment declined 70.2% to $327.1 million from $1,096.8 million registered in second-quarter 2019, primarily due to lower production volumes on the Boeing 737 and 787, and Airbus A350 programs.

Propulsion Systems: The segment recorded revenues of $169.6 million in the reported quarter, down 67.3% from $518.9 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 69.3% to $122.5 million from $398.5 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 43.5% year over year to $1,011.6 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 $367 million in the second quarter of 2020 against operating earnings of $226 million in the prior-year quarter.

Financial Position

As of Jul 2, 2020, Spirit AeroSystems had $1,947.1 million in cash and cash equivalents compared with $2,350.5 million as of Dec 31, 2019.

At the end of the first six months of 2020, long-term debt totaled $3,050.6 million compared with $2,984.1 million at the end of 2019.

Net cash used in operating activities increased to $559.7 million at the end of second-quarter 2020 against net cash inflow of $471.7 million at the end of second-quarter 2019.

Capital expenditures summed $20 million during the second quarter, down from $37 million in the prior-year quarter.

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 -113.57% due to these changes.

VGM Scores

At this time, Spirit Aerosystems has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Spirit Aerosystems has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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