Analyst Expects Spirit AeroSystems To See Lower Cash Generation & Raises Other Concerns

Truist Securities analyst Michael Ciarmoli downgraded Spirit AeroSystems Holdings Inc SPR from Buy to Hold with a lowered price target of $25 from $42.

Yesterday, the company reported revenue growth of 8% year-over-year to $1.36 billion, beating the consensus of $1.31 billion. Adjusted EPS loss expanded to $(1.46) from $(1.21) a year ago, missing the consensus of $(0.86).

Ciarmoli expects materially lower FCF generation in 2024 and 2025 and notes advance repayment of $100 million in 2025 an unforeseen development.

The analyst believes management's previously guided long-term financial targets of 16.5% margins and FCF conversion rate of 7%-9% are 'no longer achievable' and expects the company to reduce the targets.

Also, Ciarmoli thinks the pending recovery in wide-body production rates may lead to additional charges and forward losses and expects a contract renegotiation failure with The Boeing Company BA to weigh on margins and result in additional cash.

Consequently, the analyst lowered the estimate for EPS to $(3.42) from $(2.09) vs. consensus of $(2.34) for 2023 and $1.20 from $1.69 vs. consensus of $1.45 for 2024.

Other analysts, too, lowered their price target on the stock.

Goldman Sachs to $30 from $45 (downgraded to Neutral from Buy rating), Morgan Stanley to $22 from $27 (Underweight), RBC Capital Markets to $26 from $32 (maintained Sector perform), and Susquehanna to $32 from $37 (maintained Positive rating).

Price Action: SPR shares are trading lower by 2.4% at $22.31 on the last check Thursday.