Spirit Aerosystems Holdings, Inc. SPR, a designer and manufacturer of aero structures for both commercial and defense aircraft, is set to release fourth-quarter 2018 results on Feb 1, before the opening bell.
Contributions from higher production rates are expected to boost the bottom line in the to-be-reported quarter. Notably, the company is expected to come up with a positive surprise this earnings season. Last reported quarter, the company delivered an earnings surprise of 4.29%.
Let’s see how things are shaping up prior to this announcement.
Fuselage Systems Likely to Drive Growth
Spirit AeroSystems’ Fuselage Systems segment, which represents more than 50% of its total sales, has continued to be a major growth driver for the company. Revenues at this segment have been driven by higher production deliveries of Boeing 737 and Airbus A350 jets. In line with this, deliveries of Boeing 737 witnessed a 16.9% rise in the fourth quarter compared with the previous year’s quarter. As a result, the Fuselage Systems segment is likely to drive top-line growth. Considering this, the Zacks Consensus Estimate for the segment’s fourth-quarter sales is pegged at $1,024 million, reflecting year-over-year rise of 11.4%.
Other Factors at Play
Spirit AeroSystems’ Propulsion Systems segment also witnessed a rise in revenues during the third quarter of 2018, primarily due to higher propulsion deliveries for the Boeing 737 program. So, we may expect this trend to get reflected in the to-be-reported quarter’s results.
Moreover, with the 787 program deliveries witnessing 8.3% year-over-year rise during the fourth quarter, the Propulsion Systems segment is expected to record favorable numbers in terms of top-line figure. In line with this, the Zacks Consensus Estimate for the segment’s fourth-quarter sales is pegged at $420 million, reflecting year-over-year rise of 1%.
In fact, all the three business segments of the company witnessed an impressive fourth quarter, including the Wing Systems segment, backed by
strong delivery figures. Consequently, the Zacks Consensus Estimate for Spirit AeroSystems’ fourth-quarter revenues is pegged at $1,858 million, reflecting year-over-year rise of 8.4%.
Bottom-Line View
During the third quarter, the company incurred increased costs pertaining to the schedule recovery of the Boeing 737 program. However, Spirit AeroSystems anticipates continued cost improvement from this program in the fourth quarter, with declining levels of overtime and contract labor, and elimination of expedited freight.
Moreover, margin improvement across the company’s segments are projected in the fourth quarter, as Spirit AeroSystems focuses on improving
production efficiency. Such cost and margin improvements are likely to boost the company’s bottom line. Evidently, the Zacks Consensus Estimate for Spirit AeroSystems’ fourth-quarter earnings of $1.78 per share reflects an annual rise of 34.9%.
Spirit Aerosystems Holdings, Inc. Price and EPS Surprise
Spirit Aerosystems Holdings, Inc. Price and EPS Surprise | Spirit Aerosystems Holdings, Inc. Quote
Earnings Whispers
Our proven model does not conclusively 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 see below.
Earnings ESP: Spirit Aerosystems has an Earnings ESP of -1.20%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Spirit Aerosystems currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is
seeing negative estimate revisions.
Upcoming Defense Releases
Here are some defense companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:
Nortrhrop Grumman NOC is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +2.02% and a Zacks Rank #1.
Raytheon Company RTN is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +1.78% and a Zacks Rank # 3.
Huntington Ingalls Industries HII is expected to report fourth-quarter 2018 results on Feb 14. The company has an Earnings ESP of +7.09% and a Zacks Rank #3.
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