Will Lower 737 Deliveries Hurt Aerosystems (SPR) Q3 Earnings?

Spirit Aerosystems Holdings, Inc . SPR , a designer and manufacturer of aero structures for both commercial and defense aircraft, is set to release third-quarter 2018 results on Oct 31, before the opening bell.

Contributions from higher production rates are expected to boost the bottom line in late 2018.

Let's see how things are shaping up prior to this announcement.

Will Fuselage Systems Continue to Drive Growth?

Spirit AeroSystems' Fuselage Systems segment, which represents more than 50% of its total sales, has been a major growth driver for the company. The revenues at this segment has been historically driven by higher production deliveries of the Boeing 737 and Airbus A350 jets.

However, in the third quarter of 2018, deliveries of both Boeing 737 and Airbus A350 have witnessed declines of 4.8% and 10%, respectively, compared with that in the previous year's quarter. As a result, this segment may not reflect similar top-line growth trends this time as it did in prior few quarters.

Farnborough Air Show: A Key Catalyst

During the third quarter, Spirit AeroSystems participated in the 2018 Farnborough Airshow event, which witnessed orders, commitments and options of more than 1,400 aircraft, totaling more than $128 billion at list prices.

Notable order inflows owing to this airshow are likely to have a favorable impact on the company's top line as it is associated with all the Airbus and Boeing's commercial programs, the two leading aircraft makers in the world. Evidently, the Zacks Consensus Estimate for third-quarter revenues of $1.82 billion reflects year-over-year growth of 3.9%.

Other Factors at Play

Spirit AeroSystems' Propulsion Systems segment witnessed a decline in revenues during the second quarter of 2018, due to lower production deliveries on the Boeing 777 program and lower revenues realized from the Boeing 787 program, resulting from the adoption of ASC 606. With delivery for the 777 program witnessing a significant 25% year-over-year plunge during the third quarter, we may expect the segment to once again deliver poor performance in terms of the top-line figure. In line with this, the Zacks Consensus Estimate for the segment's third-quarter sales is pegged at $406 million, reflecting a year-over-year decline of 0.5%.

From the bottom-line context, in relation to the Asco acquisition, Spirit AeroSystems completed $1.3 billion of debt financing to lower the overall cost of borrowing and extend maturities. Considering this, the Zacks Consensus Estimate for Spirit AeroSystems' third-quarter earnings of $1.63 reflects an annual rise of 29.4%.

Earnings Whispers

Our proven model does not conclusively show that Spirit Aerosystems is likely to beat on 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.

Earnings ESP : Spirit Aerosystems has an Earnings ESP of -3.75%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Spirit Aerosystems currently carries a Zacks Rank #3 (Hold).

Spirit Aerosystems Holdings, Inc. Price and EPS Surprise

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

Recent Defense Releases

Textron Inc. TXT reported third-quarter 2018 adjusted earnings from continuing operations of 61 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 19.7%. You can see the complete list of today's Zacks #1 Rank stocks here .

Lockheed Martin Corp. LMT reported third-quarter 2018 earnings of $5.14 per share, beating the Zacks Consensus Estimate of $4.32 by 19%. The bottom line also improved 54.8% from the year-ago quarter's figure of


Upcoming Defense Releases

Transdigm Group TDG is expected to report third-quarter 2018 results on Nov 8. The company has an Earnings ESP of +0.05% and a Zacks Rank of 2.

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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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