Spirit AeroSystems Encounters Headwinds In Q1 As Boeing 737 Issues Take Toll

Spirit AeroSystems Holdings Inc SPR shares are trading lower after it reported first-quarter 2024 results, with revenue growth of 19% Y/Y to $1.703 billion, beating the consensus of $1.62 billion. 

The revenue increase represents higher production activities on Commercial programs and higher Defense and Space revenues. Overall deliveries decreased to 307 shipsets during the quarter compared to 346 shipsets YoY.

Spirit’s backlog stood at ~$49 billion at the end of the quarter, including work packages on all commercial platforms in the Airbus SE EADSY and Boeing Co BA backlog.

Also Read: Deal On Cards? Boeing Explores Reacquiring Spirit AeroSystems Amidst Quality Concerns, Production Challenges

The quarter’s adjusted EPS was $(3.93), negatively influenced by significant unfavorable estimate revisions and further impacted by Boeing’s schedule changes in March and the investigation and quality audits following the Alaska Airlines incident.

Cash used in operations stood at $(416) million vs. $(46) million a year ago, and the free cash outflow totaled $(444) million, which was impacted by Boeing 737 production disruptions and delivery delays. The cash balance at the end of the quarter was $352 million.

Sales by segments: Commercial $1.356 billion (+18.1% Y/Y), Defense & Space $250.8 million (+33.1% Y/Y), and Aftermarket $95.9 million (+1.5% Y/Y).

Operating loss was $(527.6) million vs. $(95.1) million compared to last year.

Also Read: Boeing, Airbus Near Deal To Divide Operations Of Key Supplier Spirit AeroSystems: Report

Boeing 737 Update: As of March 1, 2024, Spirit AeroSystems and Boeing conducted joint product verifications to ensure conformity before final assembly in Renton, leading to delayed deliveries and increased inventory in Wichita, affecting cash flow.

Spirit announced that it will withhold guidance until it gains further clarity on the Boeing acquisition talks, 737 MAX delivery and production schedules, and ongoing commercial negotiations with Airbus.

Related: Airbus Demands Compensation To Acquire Spirit Operations: Report

During the quarter, Spirit AeroSystems secured a deal with Boeing for $425 million in cash advances, contingent on meeting production targets expected in the second quarter of 2024. Additionally, subsequent to the end of the first quarter, Spirit received indications that Boeing expects a slower increase in production and deliveries on the 787 program. 

The company expects an incremental forward loss of approximately $50 million-$60 million in the second quarter of 2024 due to decreased production and fixed cost challenges, pending further updates from Boeing.

Price Action: SPR shares are trading lower by 1.21% at $32.62 at the last check Tuesday.

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