Why Is Spirit Aerosystems (SPR) Down 9% Since Last Earnings Report?

A month has gone by since the last earnings report for Spirit Aerosystems (SPR). Shares have lost about 9% 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 catalysts.

Spirit AeroSystems Q1 Earnings Beat, Revenues Up Y/Y

Spirit AeroSystems Holdings reported first-quarter 2022 adjusted earnings of 3 cents per share, which beat the Zacks Consensus Estimate for a loss of 61 cents. The bottom line also improved significantly from the year-ago quarter’s loss of $1.22.

Barring one-time adjustments, the company reported a GAAP loss of 51 cents per share compared with a loss of $1.65 in the year-ago quarter.

Highlights of the Release

Total revenues of $1,175 million exceeded the Zacks Consensus Estimate of $1,094 million by 7.3%. Moreover, the top line rose 30% on a year-over-year basis, driven by higher production deliveries on the Boeing 737, Airbus A220 and Airbus A320 programs and increased aftermarket revenues.

Backlog at the end of first-quarter 2022 was $36 billion compared with $35 million at the end of 2021.

Segment Performance

Commercial Segment: Revenues in the segment increased 34.8% year over year to $938.4 in the first quarter, driven by higher production volumes on the Boeing 737, Airbus A220 and A320 programs.

Operating loss narrowed to $3.4 million from an operating loss of $82.9 million in the year-ago quarter.

Defense & Space: The segment recorded revenues of $158.5 million in the reported quarter, up 3.3% year over year. The upside can be attributed to increased production volumes from the Boeing P-8 program.

Operating income in the first quarter increased 66.7% to $20 million from $12 million in the year-ago quarter.

Aftermarket: Revenues in the segment improved a solid 51.7% year over year to $77.8 million in the first quarter, driven by higher spare part sales and maintenance, repair and overhaul (MRO) activity.

Operating profit in the first quarter increased a solid 66.7% to $18 million.

Operational Highlights

Total operating costs and expenses rose 18.5% year over year to $1,216.9 million on account of higher cost of sales, increased selling, general and administrative expenses and elevated research and development expenses.

The company incurred an operating loss of $42.2 million in the first quarter compared with the year-ago quarter’s loss of $125.9 million.

Financial Position

At the end of first-quarter 2022, SPR had $1,151.8 million of cash and cash equivalents compared with $1,478.6 million as of Dec 31, 2021.

At the end of the first quarter, long-term debt totaled $3,734 million compared with $3,742.7 million at the end of 2021.

Cash outflow from operating activities was $270.2 million during the first quarter compared with $170.2 million a year ago.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 45.89% due to these changes.

VGM Scores

Currently, Spirit Aerosystems has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, 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 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Spirit Aerosystems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Spirit Aerosystems belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, Aerojet Rocketdyne Holdings (AJRD), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Aerojet Rocketdyne reported revenues of $511.1 million in the last reported quarter, representing a year-over-year change of +3%. EPS of $0.44 for the same period compares with $0.22 a year ago.

Aerojet Rocketdyne is expected to post earnings of $0.48 per share for the current quarter, representing a year-over-year change of -18.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Aerojet Rocketdyne. Also, the stock has a VGM Score of C.

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