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Low 777 Demand to Hurt Spirit AeroSystems (SPR) Q2 Earnings?

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Spirit Aerosystems Holdings, Inc. (SPR - Free Report) , a designer and manufacturer of aero structures for both commercial and defense aircraft, is set to release second-quarter 2018 results on Aug 1, before the opening bell.

Increased demand for Boeing’s 737 and Airbus’s A350 jets is expected to boost Spirit AeroSystems’ second-quarter revenues. However, contributions from higher production rates, expected to boost bottom line in late 2018, are projected to hurt quarterly earnings this time.

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

Will Fuselage Systems Drive Growth?

Fuselage Systems segment, which represents more than 50% of Spirit AeroSystems’ total sales, has been a major growth driver for the company. The revenues at the segment increased 5% year over year in the first quarter of 2018, driven by higher production deliveries of Boeing 737 and Airbus A350 jets.

Keeping this trend alive, deliveries for Boeing 737 rose 11.4% year over year to 137 in the second quarter, while the same for Airbus A350 rose 33% to 40. Such delivery upside is likely to boost revenue growth of Spirit Aerosystems’ Fuselage Systems segment. Evidently, the Zacks Consensus Estimate for the segment’s second-quarter sales is pegged at $952 million, reflecting year-over-year rise of 4%.

Can Propulsion Systems Hurt?

The company’s Propulsion Systems Segment, witnessed a decline in revenues during the first quarter of 2018, due to lower production deliveries for Boeing 777 jets. With the delivery for the 777 program having witnessed a significant 38.1% plunge during the second quarter, we may expect the segment to once again deliver poor performance in terms of top-line figure. In line with this, the Zacks Consensus Estimate for the segment’s second-quarter sales is pegged at $408 million, reflecting a year-over-year decline of 9.7%.

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise | Spirit Aerosystems Holdings, Inc. Quote

Other Factors Under Consideration

As per the Zacks Consensus Estimate, Spirit AeroSystems’ Wing Systems division is also expected to deliver annual top-line growth. Currently, the Zacks Consensus Estimate for second-quarter revenues of $1.86 billion reflects year-over-year growth of 1.6%.

However, the company incurred higher costs in the first quarter related to supplier disruption, overtime, expedited freight and surge resources. These costs are further expected to carry over into the second quarter.

Such increased expenses are expected to have a significant impact on its results in the to-be reported quarter. Considering this, the Zacks Consensus Estimate for Spirit AeroSystems’ second-quarter earnings of $1.51 per share reflects an annual decline of 3.8%.

Earnings Whispers

Our proven model does not show that Spirit Aerosystems is likely to beat on earnings this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here, as you will see below.

Earnings ESP: Spirit Aerosystems has an Earnings ESP of -0.22%. 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 #4 (Sell).

Recent Defense Releases

Lockheed Martin (LMT - Free Report) reported second-quarter 2018 adjusted earnings of $4.31 per share, beating the Zacks Consensus Estimate of $3.89 by 10.8%. It carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Textron (TXT - Free Report) reported second-quarter 2018 earnings from continuing operations of 87 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 24.3%. It carries a Zacks Rank #2.

Hexcel Corp. (HXL - Free Report) reported second-quarter 2018 adjusted earnings of 75 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 1.3%. However, the bottom line improved 11.9% from the prior-year figure of 67 cents. It carries a Zacks Rank #3.

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