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Spirit Aerosystems (SPR) Up 89.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Spirit Aerosystems (SPR - Free Report) . Shares have added about 89.8% 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 drivers.

Spirit AeroSystems Q3 Earnings Top, Revenues Slump Y/Y

Spirit AeroSystems reported third-quarter 2020 adjusted loss of $1.34 per share, narrower than the Zacks Consensus Estimates of a loss of $1.65. In the third quarter of 2019, the company had reported adjusted earnings of $1.38 per share.

Barring one-time adjustments, the company incurred GAAP loss of $1.50 per share against earnings of $1.26 in the year-ago quarter.

Highlights of the Release

Total revenues of $806 million beat the Zacks Consensus Estimate of $772 million by 4.5%. However, the top line plunged a massive 58% from $1,920 million in the year-ago period. The decline in revenues was primarily due to significantly lower 737 MAX production resulting from program grounding and also the impacts of COVID-19 pandemic.

Backlog at the end of third-quarter 2020 was $40 billion, lower than $41 billion in the prior quarter.

Segment Performance

Fuselage Systems: Revenues in the segment declined 58% year over year to $421 million from $1,005.3 million registered in third-quarter 2019, primarily due to lower production volumes of Boeing 737 and 787, and Airbus A350 programs.

Propulsion Systems: The segment recorded revenues of $170.8 million in the reported quarter, down 67.2% from $520.9 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 57% to $168.3 million from $391 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 42.6% year over year to $983.2 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 $176.9 million in the third quarter of 2020 against operating earnings of $206.1 million in the prior-year quarter.

Financial Position

As of Oct 1, 2020, Spirit AeroSystems had $1,441.3 million in cash and cash equivalents compared with $2,350.5 million as of Dec 31, 2019.

At the end of the first nine months of 2020, long-term debt totaled $2,659 million compared with $2,984.1 million at the end of 2019.

Net cash used in operating activities came in at $612.8 million at the end of third-quarter 2020 against net cash inflow of $718.6 million at the end of third-quarter 2019.

Capital expenditures totaled $19 million during the third quarter, down from $41 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 -1304.44% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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