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Why Is Spirit Aerosystems (SPR) Down 5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Spirit Aerosystems (SPR - Free Report) . Shares have lost about 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 drivers.

Spirit AeroSystems Q2 Loss Wider & Revenues Beat

Spirit AeroSystems reported a second-quarter 2022 adjusted loss of $1.21 per share, wider than the Zacks Consensus Estimate for a loss of 23 cents. The bottom line also deteriorated significantly from the year-ago quarter’s loss of 31 cents per share.

Barring one-time adjustments, the company reported a GAAP loss of $1.17 per share compared with a loss of $1.30 in the year-ago quarter.

Highlights of the Release

Total revenues of $1,258 million exceeded the Zacks Consensus Estimate of $1,246 million by 0.9%. Moreover, the top line rose 26% on a year-over-year basis, driven by the higher production deliveries of the Boeing 737 and increased aftermarket revenues.

The backlog at the end of the second quarter of 2022 was $34 billion compared with $35 million at the end of 2021.

Segment Performance

Commercial Segment: Revenues in the segment increased 28.3% year over year to $1,031.1 in the second quarter, driven by higher production volumes on the Boeing 737, 777 and Airbus A220 programs.

The operating loss increased to $45.1 million from an operating loss of $44.7 million in the year-ago quarter.

Defense & Space: The segment recorded revenues of $146.4 million in the reported quarter, up 3.2% year over year. The upside can be attributed to increased production volumes from the Boeing P-8 program and higher development activity.

The operating income in the second quarter increased 10.5% to $13.7 million from $12.4 million in the year-ago quarter.

Aftermarket: Revenues in the segment improved a solid 41.8% year over year to $80.4 million in the second quarter, driven by higher spare part sales and maintenance, repair and overhaul activity.

The operating profit in the second quarter decreased 20.3% to $11.8 million.

Operational Highlights

Total operating costs and expenses rose 23.9% year over year to $1,362.6 million due to the higher cost of sales, increased SG&A expenses and elevated research and development expenses.

The company incurred an operating loss of $104.7 million in the second quarter compared with the year-ago quarter’s loss of $97.7 million.

Financial Position

As of Jun 30, 2022, SPR had $770.2 million of cash and cash equivalents compared with $1,478.6 million as of Dec 31, 2021.

Long-term debt as of Jun 30, 2022 totaled $3,424.8 million compared with $3,742.7 million at the end of 2021.

The cash outflow from operating activities was $331.7 million during the six months ended Jun 30, 2022 compared with $197.7 million a year ago.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -15100% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

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

Performance of an Industry Player

Spirit Aerosystems is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Aerojet Rocketdyne Holdings (AJRD - Free Report) , a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended June 2022 more than a month ago.

Aerojet Rocketdyne reported revenues of $528.5 million in the last reported quarter, representing a year-over-year change of -5.1%. EPS of $0.20 for the same period compares with $0.59 a year ago.

Aerojet Rocketdyne is expected to post earnings of $0.45 per share for the current quarter, representing a year-over-year change of -22.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Aerojet Rocketdyne. Also, the stock has a VGM Score of D.


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