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Why Is Spirit Aerosystems (SPR) Down 5.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Spirit Aerosystems (SPR). Shares have lost about 5.3% 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 the most recent earnings report in order to get a better handle on the important drivers.

Spirit AeroSystems Q3 Earnings Miss, Revenues Rise Y/Y

Spirit AeroSystems incurred third-quarter 2021 adjusted loss of $1.13 per share, which was wider than the Zacks Consensus Estimate of a loss of 77 cents.

The bottom line however improved from the year-ago quarter’s loss of $1.34. Including one-time adjustments, the company reported a GAAP loss of $1.09 per share compared with a loss of $1.50 in the year-ago quarter.

The year-over-year upside can be attributed to lower forward loss charges and lower excess capacity costs incurred in the third quarter of 2021 when compared with the last year’s third quarter.

Highlights of the Release

Total revenues of $980 million missed the Zacks Consensus Estimate by 2.2%. However, the top line improved 22% on a year-over-year basis from $645 million. The upside was driven by higher production deliveries on the Boeing 737 and increased revenues from the recently acquired A220 wing and Bombardier programs

Backlog at the end of third-quarter 2021 was $33 billion compared with $34 million at the end of second-quarter 2021.

Segment Performance

Fuselage Systems: Revenues in the segment increased 14.3% year over year to $481.2 million in third-quarter 2021, primarily due to higher production volumes from the Boeing 737 and the recently-acquired Bombardier programs.

Propulsion Systems: The segment recorded revenues of $247.8 million in the reported quarter, up 45.1% year over year. The upside can be attributed to increased revenues from the Boeing 737 program and aftermarket sales.

Operating income for the third quarter of 2021 amounted to $21.9 million against an operating loss of $15.6 million in the year-ago quarter.

Wing Systems: Revenues in the segment improved a solid 44.4% year over year to $243 million in the third quarter, driven by increased production deliveries on the Boeing 737, Airbus A320 and A220 programs.

Operating loss for the third quarter of 2021 narrowed to $15.8 million compared with operating loss of $23.2 million in the year-ago quarter.

Operational Highlights

Total operating costs and expenses increased 15.6% year over year to $1,136.6 million on account of a higher cost of sales, selling, general and administrative expenses, as well as research and development expenses.

The company incurred an operating loss of $156.6 million in the third quarter of 2021 compared with an operating loss of $176.9 million in the prior-year quarter.

Financial Position

As of Sep 30, 2021, Spirit AeroSystems had $1,430.6 million of cash and cash equivalents compared with $1,873.3 million as of Dec 31, 2020.

At the end of third-quarter 2021, long-term debt totaled $3,546.7 million compared with $3,532.9 million at the end of 2020.

Cash flow from operating activities was $13.3 million at the end of third-quarter 2021 against cash outflow of $612.8 million at the end of third-quarter 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -29.57% due to these changes.

VGM Scores

At this time, Spirit Aerosystems has a nice Growth Score of B, a grade with the same score on the momentum front. 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 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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