Spirit AeroSystems (SPR) Q4 Earnings: What's in the Cards?

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 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 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.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise | Spirit Aerosystems Holdings, Inc. Quote

Price Movement

Spirit AeroSystems gained 18% in the last three months, outperforming the Zacks categorized Aerospace-Defense Equipment industry's gain of 5.1%. This is probably due to the company's strong cash balance position, positive revenue accomplishments as well as progress in sustained order deliveries.

Stocks that Warrant a Look

Here are a few stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Huntington Ingalls Industries, Inc. HII is expected to report fourth-quarter 2016 results on Feb 16. The company has an Earnings ESP of +2.82% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Curtiss-Wright Corporation CW is expected to report fourth-quarter 2016 results on Feb 15. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

Recent Peer Release

Northrop Grumman Corporation NOC reported fourth-quarter 2016 adjusted earnings of $2.66 per share, beating the Zacks Consensus Estimate of $2.49 by 6.8%. Reported earnings were also up 22% year over year.

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Northrop Grumman Corporation (NOC): Free Stock Analysis Report

Boeing Company (The) (BA): Free Stock Analysis Report

Spirit Aerosystems Holdings, Inc. (SPR): Free Stock Analysis Report

Curtiss-Wright Corporation (CW): Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report

Airbus Group (EADSY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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