Spirit AeroSystems Holdings, Inc. SPR, a designer and manufacturer of aerostructures for both commercial and defense aircraft, is set to release fourth quarter and full-year 2016 results on Feb 1, before the opening bell.
In the preceding quarter, the company posted a positive earnings surprise of 15.24%. Moreover, Spirit Aerosystems outperformed the Zacks Consensus Estimate in all of the trailing four quarters, the average positive surprise being 11.60%.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Growing global demand for commercial airplanes is expected to boost sales of large aerostructures and components offered by Spirit AeroSystems. This along with its better-than-expected performance, till the third quarter, encouraged the company to raise its full-year 2016 revenue guidance by $100 million to a new range of $6.7–$6.8 billion. Management also raised its earnings outlook to the band of $3.65–$3.80 per share.
Moreover, the company’s long-term contracts with industry bellwethers like The Boeing Company BA and Airbus Group SE EADSY should help boost revenues.
However, recent hike in fuel costs and a stronger U.S. dollar are expected to dent growth in the global aviation business, at least in the near term. Considering this, the company might not achieve its full-year goals if the higher fuel costs manage to mar its revenue growth.
Among the major highlights of the fourth quarter, the installation of a water cycling project Spirit Aerosystems at Wichita, KS, is a notable one. This project will enable the company to improve its factory efficiencies and conserve up to 500 million gallons of water each year.
On the flip side, lower production deliveries of the Boeing 747 program hampered Spirit Aerosystems’ revenues partially during the third quarter with no improvement expected in the near term. Also, management expects to witness higher capital expenditure during the fourth quarter, which in turn might reduce its free cash flow balance.
Adding to the concerns, the industry in which Spirit AeroSystems operates remains incredibly dynamic and competitive.
For the fourth quarter, the Zacks Consensus Estimate for earnings per share of $1.02 reflects a 7.46% year-over-year improvement, while sales are anticipated to be up 0.6% to $1.62 billion.
Earnings Whispers
Our proven model does not conclusively show that Spirit AeroSystems is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: Spirit AeroSystems has an Earnings ESP -1.96%. This is because the Most Accurate estimate stands at $1.00, while the Zacks Consensus Estimate is pegged higher at $1.02. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Spirit AeroSystems carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.