Can High Deliveries Aid Spirit AeroSystems (SPR) Q4 Earnings?
Zacks Investment Research | Jan 29, 2019 09:40PM ET
Spirit Aerosystems Holdings, Inc. (NYSE: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 (NYSE:BA) 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%.
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