Spirit AeroSystems (SPR) reported their fourth quarter and final results for 2011 Thursday, but more importantly they provided much waited on guidance for the upcoming year. SPR is a manufacturer of aviation components for companies like Boeing (BA); Gulfstream, a division of General Dynamics (GD; Airbus, part of EADS (EADSF.PK); as well as for the defense industry. They were originally spun out of Boeing and build the majority of the 737 airliner.
The stock has attracted a great deal of attention from analysts, many of whom have upgraded the company to a buy, predicting a strong 2012. The price has gone up from a low of $14.27 to trading consistently around $23 to $24.00. This has meant it has recovered close to its high of last year. Late last year some were predicting the price would go over $27.00 with this earnings report.
The company did not disappoint with its earnings. For the last quarter they had revenues of $1.22 billion and an operating income of $102 million. For the year as a whole they generated $4.86 billion and had an income of $356 million. The Earnings per Share (EPS) came in at $1.35. In the last quarter it was 52 cents, about 9 cents above consensus estimates, but a full year charge due to program delays reduced this to 42 cents. Compared to 2010 revenues were up almost 700 million but operating income held steady.
The charge was related to program delays for some of the new systems Spirit AeroSystems is involved in. These include Boeing's 787 composite advanced airliner, which has suffered from delays in entering service; the 737MAX extended 737 aircraft (rather then canceling the 737 for an all new aircraft), as well as the Gulfstream G650 and G280 aircraft. These delays meant that the company was investing money while waiting for deliveries and revenues to increase.
The day before the earnings were released, Auriga reiterated their buy rating and predicted a stock price of $27.50. They correctly guessed that performance would be flat for all of 2011 but believe the company has strong "tailwinds going forward".
This is due to the beginning of deliveries of the 787 to Boeing's customers and the steady ramp up in production at both their Washington and South Carolina plants. The G280 is also beginning to complete development, testing and certification and should start being received by its customers.
Spirit has not stood still as these programs were delayed, but has been investing in new facilities and employees to support them. The company is increasing its plant space by over 90,000 square feet and will add more employees to the 1,000 they hired last year. This expansion will support the 787 and 737 production lines.
The Wichita, Kansas based company is predicting that for 2012 it should have revenue of $5.2-5.4 billion which is an increase of eight to eleven percent with earnings a share at $2.00 to $2.15 or an increase of sixty percent. If these goals are met then share prices should rise accordingly.
This is based on Boeing and Gulfstream especially meeting their delivery goals. The 787 is continuing to have some minor problems which may affect deliveries this upcoming year. A downturn in the world's economy as happened four years ago could also negatively affect airline's investment in new aircraft. The continued price increase in fuel could help as more fuel efficient planes are sought and older ones retired.
Overall despite the miss on earnings caused by the charges, Spirit AeroSystems delivered what was expected of them. The market responded accordingly Thursday with an increase of $1.08 in stock price. Over the next several months the stock should continue this growth as sentiment seems to think it will.