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Why Is Spirit Aerosystems (SPR) Up 66% 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 added about 66% 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 catalysts.

Spirit AeroSystems Q1 Earnings Beat, Revenues Fall Y/Y

Spirit AeroSystems reported first-quarter 2020adjusted loss of 79 cents per share, which came in narrower than the Zacks Consensus Estimate of a loss of $1.42. The bottom line however deteriorated from the year-ago quarter’s earnings of $1.68.

Including one-time adjustments, the company reported GAAP loss of $1.57 per share against earnings of $1.55 in the year-ago quarter.

The year-over-year deterioration can be attributed to lower margins and higher restructuring expenses that the company witnessed as a result of production suspension of Boeing (BA) 737.

Highlights of the Release

Total revenues of $1,077 million exceeded the Zacks Consensus Estimate of $973 million by 10.7%. However, the top line declined a staggering 45% on a year-over-year basis.

Backlog at the end of first-quarter 2020 was $42 billion compared with $43 million at the end of 2019.

Segment Performance

Fuselage Systems: Revenues at the segment declined 48% year over year to $552 million infirst-quarter 2020. Lower production volumes of the Boeing 737 program resulting from the production suspension that began from Jan 1, 2020 caused the top-line deceleration.

Operating loss for the first quarter of 2020 decreased to $86.4 million against operating earnings of $138.9 million in the year-ago quarter.

Propulsion Systems: The segment recorded revenues of $225 million in the reported quarter, down 54% year over year. The decline can be attributed to lower production volumes from the Boeing 737 program.

Operating loss for the first quarter of 2020 decreased to $5.3 million against operating earnings of $95.5 million in the year-ago quarter.

Wing Systems: Revenues at the segment decreased 29% year over year to $291 million in the first quarter. The decline can be attributed to lower production volumes from the Boeing 737 program as well as lower revenues recognized on the Airbus A350 program as a result of pricing terms.

Operating earnings for the first quarter of 2020 decreased to $13.6 million from $65.8 million in the year-ago quarter.

Operational Highlights

Total operating costs and expenses declined 28.3% year over year to $1,244.8 million on account of lower cost of sales; selling, general and administrative expenses; as well as reduced research and development expenses.

The company incurred operating loss of $167.5 million in the first quarter of 2020 against operating earnings of $233 million in the prior-year quarter.

Financial Position

As of Apr 2, 2020, Spirit AeroSystems had $1,833.6 million in cash and cash equivalents compared with $2,350.5 million as of Dec 31, 2019.

At the end of first-quarter 2020, long-term debt totaled $2,978.2 million compared with $2,984.1 million at the end of 2019.

Cash outflow from operating activities was $331.3 million at the end of first-quarter 2020 against cash inflow of $242.2 million at the end of 2019.

Capital expenditures totaled $31 million in first-quarter 2020 compared with $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 estimates revision. The consensus estimate has shifted -75.34% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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. 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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