Spirit Aerosystems Poised To Break Out

| About: Spirit AeroSystems (SPR)
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Spirit Aerosystems (NYSE:SPR) is a Wichita, KS based manufacturer of aircraft assemblies and components as well as providing design, fabrication and spare parts for a variety of aircraft manufacturers across the globe. It was formed when Boeing (NYSE:BA) spun off its Spirit AeroSystems group from its Commercial Airplane division. Spirit still provides significant support to Boeing especially the 737 line as well as the world's other large airliner manufacturer, EADS (OTCPK:EADSF).

Even with this varied product line and a significant amount of contracts Spirit Aerosystem's stock has not traded in a wide range in the past five years. It currently is at $22.50 after yesterday's close and its 52 week low and high was $14.27 to $26.49. It has shown a steady increase over the last quarter from a price of $17.07 on 31 October. This came after a decline in the late summer of last year.

The company is getting ready to report next week on its fourth quarter and the overall results for 2011. There are some expectations that these will be good enough to cause an increase in the stock price.

Last year the quarter came in with revenues of about $1 billion and an operating income of $96 million. For 2010 as whole revenue was $4.172 billion and income $357 million. Spirit estimated a year ago it that 2011 would finish with $4.5 to $4.7 billion in revenue and earnings of $1.70 to $1.90 per share.

In August it updated its 2011 projections keeping revenue the same but income lower at $1.40 to $1.50 a share. This was due to some losses being taken on programs in development which were primarily the Gulfstream G280 mid-sized business jet. This aircraft is still in the process of receiving certification and has yet to enter production. Spirit Aerosystems has also suffered due to Boeing's delays in producing and delivering the advanced 787 airliner caused by various technical problems with the design. The company makes the wings for the G280 and the forward section and wing leading edge for the 787.

Analysts have been mixed on how they rate Spirit Aerosystems with Goldman Sachs recently giving a neutral stock rating while Wells Fargo rated it an outperform. Both Credit Suisse and Auriga estimated at the end of the last month a future price of $27.50 for the stock or a further gain of about twenty percent. Whether this kind of performance will be realized in the short term will be reliant on how well the fourth quarter and 2011 number come in.

Spirit does have some things looking up for it as 2012 progresses. The 787 program got on track last year as Boeing began deliveries and it began operating with airlines. There are currently firm orders for over 800 aircraft and Spirit will have a part of each one made. The company also supports EADS on some key programs such as the A380 jumbo jet and the A350XWB competitor to the 787. That will enter service late in 2014 and already has over 500 orders.

Boeing is also doing well with 737 sales and Spirit manufactures the fuselage and parts of the wing and engine nacelles. There are well over 1,000 of these airliners on order and Boeing is continuing to produce the aircraft even as it considers developing the replacement for it.

Does this all mean that Spirit stock will go up twenty percent in the next several months? Will it ever reach its previous peak value of over $40 a share again? There is a good chance that it will see a significant price increase as deliveries of key aircraft such as the 787 and A350XWB increase over the next five years. Those deliveries should aid income and revenue growth considerably.

It would not be unexpected based on analyst recommendations and current expectations of the company's 2012 estimates to see some movement in the stock in the near term. An increase to $27 might be a little too much to expect but it Spirit will certainly be able to add to its steady gains of the last six months. If it did add another $5 this would be an almost 100% gain since its last low this past August, which would be a nice return overall but might be hard to reach.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.