Friday, FBR Capital Markets reiterated Spirit AeroSystems Holdings Inc (SPR) stock with a Market Perform rating and a price target of $21. The brokerage lowered its 2010 EPS estimate to $1.60 from $1.94.
Analyst Patrick McCarthy noted that Spirit AeroSystems reported fourth quarter results on February 4, that were lower than expectations on both the revenue and EPS lines. Heading into the quarter, the analyst thought the focus was going to be on revenue, production rates, and the company's 2010 guidance.
The analyst added that however, margins were the story, as results came in much lower than expectations, causing the EPS miss in the quarter. The revenue miss was primarily due to lower-than-expected deliveries of 737 and 747 aircraft more than offsetting better-than-expected deliveries on the 777 and 787.
The analyst said that on the margin line, the company booked negative cumulative catch up adjustments on several programs, which ultimately led to the EPS miss for the quarter. Going forward, the company's initial 2010 guidance for revenues and EPS was weaker than the analyst's expectations.
As a result, the analyst lowered his 2010 estimate closer to the midpoint of the company's guidance, as threats of production slowdowns at the OEMs remain. The analyst cut 2010 estimate on lower volume and margin expectations.
The analyst continues to believe that commercial aerospace industry fundamentals are improving, but too many uncertainties on the margin line at SPR cause him to stay on the sidelines.
Currently, SPR is down $1.47 or 7.98% and trading at $16.95.
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