Spirit AeroSystems Holdings, Inc.SPR recently announced that it has plans to expand operations at its Tulsa, OK site by hiring nearly 250 employees over the next three years and incurring a capex of $80 million for capital projects to aid fuselage manufacturing and assembly work.
Details of the Project
Per the company's announcement, the first phase of the Tulsa operation expansion is supposed to begin with infrastructure set-up and employee training, starting in 2019. Further, the production is expected to be completed by the end of 2021. Also, the company anticipates an additional capex on equipment, tooling and facilities upgrades, which may take place through 2022.
This multi-year extension project can be realized through partnership with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW). The company expects that the new Tulsa jobs will support the ramped-up production rate of 737, freeing up the required space at Spirit AeroSystems' Wichita factory location. As the production rates increase, the Wichita hub will continue to hire additional workers to meet the surge in demand.
What's Aiding Spirit AeroSystems?
Spirit AeroSystems currently focuses on becoming more innovative by investing in technology and automation. To this end, the company informed about the creation of a new research and development complex at its Prestwick, Scotland site, which is supposed to be opened in 2019. Such initiatives should enable the company to strengthen its position in the aerospace-defense space and in turn, outperform its industry.
On the commercial front, rapid growth in air passenger and freight traffic has been fueling demand for aircraft. Notably, to meet this growing demand, The Boeing Company's BA 737 and 787 jet models and Airbus Group's EADSY A320 and A350 are all raising their production rate. With Boeing and Airbus being Spirit AeroSystems' primary customers, rapid rise in the production rates for these key programs, should further bolster Spirit AeroSystems' revenues.
As part of the fiscal 2019 defense budget proposal, $686.1 billion is being reserved as funding for the Pentagon, reflecting 5% real growth over the initial fiscal 2018 Presidential budget. This higher spending provision hints at the U.S. government's escalated capex on defense primes like Spirit AeroSystems. We may expect a consistent order flow from Pentagon to drive the company's top line in the coming days.
In a year's time, shares of Spirit AeroSystems have underperformed its industry. The stock has lost 17.1%, wider than the industry 's decline of 2.1%.
Zacks Rank & Key Pick
Spirit AeroSystems currently carries a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is AeroVironment, Inc. AVAV , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
AeroVironment delivered average positive surprise of 257.01% in the last four reported quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has been revised 13.2% to $1.54 over the past 30 days.
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