Spirit Aero Financials Hit By Widebody Woes, Gradual MAX Recovery
Spirit AeroSystems disappointed Wall Street on May 5 with a reported loss and lower revenues than expected, as well as a sobering cashflow forecast for the whole year.
Shares of the besieged Wichita aerostructures giant sank 4% in regular trading after the company reported and discussed 2021 first quarter (Q1) results. The company reported $901 million in revenue for the latest quarter, compared with $1.077 billion the year before. Net loss expanded to $172 million over $163 million. Loss per share followed at $1.65 against $1.57. Full-year cash outflow is expected to be $200-300 million.
“International air traffic demand still remains at relatively low levels versus pre-pandemic times and is expected to take longer to recover,” Spirit CEO and President Tom Gentile told a teleconference. “Consequently, we have experienced and believe there will continue to be pressure on our wide-body programs. The wide-body programs have created significant pressure on our overall performance as the OEMs have adjusted production rates on those programs downward.”
Widebody program deliveries were 48, down from 91 in the 2020 Q1, a 47% reduction, according to CFO Mark Suchinski. Narrowbody program deliveries in the 2021 Q1 were also lower when compared to 2020, with 171 shipsets in Q1 of 2021 compared to 221 in 2020. The main driver of the decrease was the A320 program with 58 less deliveries than the first quarter of 2020. MAX deliveries have “gradually” increased to 29 compared with 18 shipsets delivered in the first quarter of 2020.
Spirit is planning to produce about 160 737 MAX shipsets in 2021, the company announced. “With the current outlook, we should be at our targeted number of a permanent buffer to cushion the production system toward the second half of 2022,” Gentile said. The buffer will be having 20 shipsets in inventory.
On the 787, Spirit has had to do fit-and-finish rework per Boeing’s own reinvestigation of the program, spurring a $29 million forward loss for the aerostructures provider. The rework Spirit is doing on Section 41 is its own responsibility, Gentile acknowledged.
For analysts, the latest earnings report provided cause for reconsideration. “While Spirit is very well aligned for this narrowbody led aviation recovery, the outlook is not without risk,” noted analysts at Vertical Research Partners. “Whereas the A320 looks to be in good shape, the 737 MAX remains troubled (and partially grounded again). If Boeing’s plan to ramp up from [about] 10/month to over 30 per month is disrupted, then this would have direct ramifications for Spirit. And as we saw this quarter, the widebody end market remains weak and could also put pressure on future results. With the stock already pricing in a punchy recovery, we see better value elsewhere in the aerospace sector.”