Spirit AeroSystems Holdings, Inc. SPR is set to release fourth-quarter 2015 results before the opening bell on Feb 2, 2016. In the preceding quarter, Spirit AeroSystems delivered a negative earnings surprise of 5.32%. The company has however delivered positive earnings surprises in three of the last four quarters, with an average beat of 7.19%. Let’s see how things are shaping up prior to this announcement.
Factors to Consider
Overall, the growing demand for commercial airplanes globally is expected to boost demand for large aerostructures and components supplied by Spirit AeroSystems. The company’s long-term contracts with The Boeing Company BA and Airbus Group SE are expected to keep its revenue stream steady. The company has worked on all Boeing programs, including building about 70% of the 737s. Boeing plans to hike the 737 production rate to 57 airplanes per month in 2019.
Moreover, Spirit AeroSystems’ involvement in the defense market will help its performance. In Nov 2015, the company began first production of the Royal Australian Air Force's (RAAF) P-8A aircraft. This will open up new opportunities for the company in the defense market.
Owing to the encouraging performance in the first nine months of 2015, the company had earlier raised its 2015 earnings guidance to a range of $3.80 to $3.95 per share from the earlier estimate of $3.60 to $3.80.
Earnings Whispers?
Our proven model does not conclusively show that Spirit AeroSystems is likely to beat estimates 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. That is not the case here.
Zacks ESP: Spirit AeroSystems has an Earnings ESP of -9.57 %. This is because the Most Accurate estimate is – 85 cents while the Zacks Consensus Estimate is higher at – 94 cents.
Zacks Rank: Spirit AeroSystems’s Zacks Rank #2, which when combined with a negative ESP, makes a beat unlikely this season.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies tied to the Aerospace/Defense industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.
Huntington Ingalls Industries, Inc. HII has an earnings ESP of +1.74% and carries a Zacks Rank #3. The company is slated to report fourth quarter 2015 results on Feb 18, 2016.
Esterline Technologies Corp. ESL has an earnings ESP of +5.00% and carries a Zacks Rank #3. The company is slated to report first quarter fiscal 2016 results on Mar 3, 2016.
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