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Spirit AeroSystems Gains From Solid Jet Demand: Time to Buy?


Spirit AeroSystems Holdings, Inc. SPR is gaining from its focus on executing supply chain strategy, improving productivity and meeting customers’ requirements for production rate changes. However, stiff competition and unexpected rise in costs continue to be headwinds.

Being, one of the largest independent non-original equipment manufacturer aircraft parts designers, the company is currently focused on positioning itself for growth in both commercial and defense markets. Considering the strong demand for commercial aircraft and expected continued need for defense aircraft in the future, both markets offer immense growth opportunities for the company.

Additionally, it is also thriving to be more innovative by investing in technology and automation. Such investments, aimed at reducing costs will also aid the company to achieve increasing production rates for its contact programs.

Moreover, the company boasts a robust balance sheet and steady cash flow position that can be evidenced by its strong cash and cash equivalents, which amounted to $726.6 million at the end of the third quarter, up from $697.7 as of Dec 31, 2016. Such a favorable balance sheet offers the company its much needed financial flexibility.

However, the company needs to spend substantially on the technological front which may increase operating expenses, to keep up with its peers like Orbital ATK, Inc. OA and Bae Systems PLC BAESY.

Nevertheless, the company has been a consistent performer. In fact, the company surpassed the Zacks Consensus Estimate in three of the four trailing quarters, with an average positive surprise of 4.52%.

Price Movement

Shares of Spirit AeroSystems have outperformed the industry in the last three months. The company’s shares gained 16.6%, compared with industry’s gain of 4.1%.

Zacks Rank & Other Stocks to Consider

Spirit AeroSystems currently carries a Zacks Rank #2 (Buy). Another top-ranked stock from the sector is Curtiss-Wright Corporation CW, which carries the same rank as Spirit AeroSystems. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Curtiss-Wright delivered an average surprise of 11.8% in the trailing four quarters. Its 2017 estimates have increased to $4.75 per share from $4.53 per share in the last 90 days.

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