Boeing
supplier
Spirit AeroSystems
reports fourth-quarter results on Tuesday, and the reaction will come down to the 737 MAX.
Spirit Aero has been making multiple versions of the 737 for years and has delivered more than 10,000 ”ship sets” to Boeing, according to the company. A ship set is all the parts for one plane.
Today, Spirit Aero makes 70% of the structure of a 737 MAX, inserting some 400,000 fasteners in the process.
But the company has had some difficulties lately. An emergency door plug blew out of 737 MAX 9 jet operated by Alaska Air on Jan. 5. That incident led to more oversight and production uncertainty at Boeing, and therefore at Spirit Aero.
Spirit Aero also notified Boeing on Thursday about some improperly drilled holes. Boeing plans to rework some 50 jets as a result.
How Spirit Aero plans to fix the issue and improve quality and production will be a key topic of discussion when management speaks with investors and analysts on a conference call slated for 11 a.m. Eastern.
As for the fourth quarter about to be reported, Wall Street projects a per-share loss of 35 cents from sales of $1.7 billion. A year ago, Spirit Aero reported a $1.46 per share loss from $1.3 billion in sales.
Volume is picking up, and losses are shrinking, but the company is still losing money. Spirit Aero CEO Patrick Shanahan, who took over at the end of September, said on the company’s third-quarter earnings call a top priority was to return the company to generating positive free cash flow and investors could expect guidance on the company’s fourth-quarter earnings call.
That was before the door plug blew out of the
Alaska Air
jet. Whether or not that impacts guidance isn’t known.
For now, Wall Street expects earnings per share of 41 cents from sales of $7.6 billion for 2024. Free cash flow is expected to be positive after four consecutive years of using cash.
Growing sales and cash flow aren’t guaranteed, though. Morgan Stanley analyst Kristine Liwag wrote that Spirit Aero could see pressure from lower 737 production rates.
Boeing is making about 38 MAX jets a month today. The Federal Aviation Administration, however, has said it won’t allow any production expansion until it is satisfied with Boeing’s manufacturing and quality management processes.
Liwag rates Spirit Aero shares Hold and has a $35 price target for the stock. The average analyst price target for Spirit Aero stock is about $33. About 43% of analysts covering Spirit Aero shares rate them Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
Options markets imply the stock will move about 8%, up or down, after earnings. Shares have moved an average of about 15%, up or down, after the past four quarterly reports. Shares have risen two times and fallen two times over that span.
Coming into Tuesday trading, Spirit Aero shares were down about 22% over the past 12 months. The
S&P 500
and
Nasdaq Composite
were up about 20% and 31%, respectively.
Write to Al Root at [email protected]
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