Spirit AeroSystems Holdings, Inc. (SPR) Bundle
Understanding Spirit AeroSystems Holdings, Inc. (SPR) Revenue Streams
Understanding Spirit AeroSystems Holdings, Inc.’s Revenue Streams
The financial performance of Spirit AeroSystems Holdings, Inc. is largely driven by its diverse revenue streams. Below is a detailed breakdown of the company's primary revenue sources, year-over-year growth, segment contributions, and any significant changes in revenue streams.
Breakdown of Primary Revenue Sources
Spirit AeroSystems generates revenue primarily from three segments:
- Commercial: Revenue from commercial aircraft components.
- Defense & Space: Revenue from defense contracts and space programs.
- Aftermarket: Revenue from spare parts and maintenance services.
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, the company reported net revenues of $1,471 million, reflecting a 2% increase from $1,439 million in the third quarter of 2023. For the nine months ended September 26, 2024, revenues were $4,665 million, up 10% from $4,235 million in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the revenue contributions from each segment for the third quarter and the nine months ended September 26, 2024:
| Segment | Q3 2024 Revenue ($ million) | Q3 2023 Revenue ($ million) | Change (%) | 9M 2024 Revenue ($ million) | 9M 2023 Revenue ($ million) | Change (%) |
|---|---|---|---|---|---|---|
| Commercial | $1,139.8 | $1,136.4 | 0.3% | $3,662.3 | $3,367.9 | 8.7% |
| Defense & Space | $231.3 | $205.7 | 12.4% | $706.5 | $583.7 | 21.0% |
| Aftermarket | $99.5 | $96.8 | 2.8% | $296.5 | $283.4 | 4.6% |
| Total Segment Revenues | $1,470.6 | $1,438.9 | 2.2% | $4,665.3 | $4,235.0 | 10.2% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, the commercial segment saw a slight increase in revenue, primarily due to higher production activities across most programs, despite a decrease in the Boeing 737 production volume. The Defense & Space segment reported a significant growth of 12.4% compared to the previous year, attributed to higher activity on the Sikorsky CH-53K program and non-recurring revenue from the FLRAA program. The Aftermarket segment experienced modest growth of 2.8%, driven by increased spare parts sales.
Overall, Spirit AeroSystems' backlog at the end of the third quarter of 2024 stood at approximately $48 billion, encompassing work packages across all commercial platforms in the Airbus and Boeing backlogs.
A Deep Dive into Spirit AeroSystems Holdings, Inc. (SPR) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was -16.7%, compared to -7.2% in the same period of 2023. This indicates a decline in operational efficiency related to cost management.
Operating Profit Margin: The operating loss for the third quarter of 2024 was ($350.1 million), representing an operating loss margin of 23.8% of revenues. In the previous year, the operating loss was ($133.7 million), or 9.3% of revenues.
Net Profit Margin: The net loss for the third quarter of 2024 was ($477 million), translating to a net loss margin of 32.4% of revenues. This is significantly worse than the net loss of ($204 million) or 14.2% net margin in Q3 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | -16.7% | -7.2% | -9.5% |
| Operating Loss | ($350.1 million) | ($133.7 million) | - |
| Operating Loss Margin | 23.8% | 9.3% | 14.5% |
| Net Loss | ($477 million) | ($204 million) | - |
| Net Loss Margin | 32.4% | 14.2% | 18.2% |
Trends in Profitability: Over the past year, the company has experienced a significant decline in profitability metrics. The gross profit margin has deteriorated from -7.2% to -16.7%, indicating increasing costs and operational inefficiencies.
Comparison with Industry Averages: The aerospace and defense industry typically reports gross margins in the range of 15%-20%. The current gross profit margin of -16.7% indicates that the company is operating far below industry standards. Similarly, the operating loss margin and net loss margin highlight challenges in maintaining profitability compared to industry peers.
Operational Efficiency Analysis: The increase in operating losses can be attributed to higher costs associated with production inefficiencies and unfavorable changes in estimates. The company reported net forward losses of $217 million in Q3 2024, significantly impacting profitability. Excess capacity costs were recorded at $70 million, further straining the financial results. In comparison, in Q3 2023, forward losses were $101 million with excess capacity costs of $56 million.
Cost Management Efforts: The company is implementing various cost-saving measures, including employee furloughs and a hiring freeze, to manage expenses amid ongoing financial pressures from production challenges.
| Cost Management Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Forward Losses | $217 million | $101 million |
| Excess Capacity Costs | $70 million | $56 million |
In summary, the profitability metrics for the company indicate a challenging financial landscape. The significant losses across gross, operating, and net profit margins reflect the need for substantial operational improvements and effective cost management strategies.
Debt vs. Equity: How Spirit AeroSystems Holdings, Inc. (SPR) Finances Its Growth
Debt vs. Equity: How Spirit AeroSystems Finances Its Growth
As of September 26, 2024, the company’s total debt stood at $4,403 million, up from $4,084 million at the end of 2023. This increase reflects ongoing financing activities to support operations amidst challenging market conditions.
Overview of the Company's Debt Levels
The breakdown of the company's debt as of September 26, 2024, is as follows:
| Debt Type | Amount ($ in millions) |
|---|---|
| Short-term Debt | $426.2 |
| Long-term Debt | $3,976.4 |
| Total Debt | $4,403.0 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for the company as of September 26, 2024, is calculated as follows:
- Total Debt: $4,403 million
- Total Equity: ($1,936.5 million)
- Debt-to-Equity Ratio: –2.28 (negative equity indicates more liabilities than assets)
This ratio is significantly higher than the industry average, which typically ranges from 1.0 to 1.5 for aerospace and defense companies, indicating a high reliance on debt financing relative to equity.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In Q3 2024, the company entered into a delayed-draw bridge credit agreement, securing a senior secured term loan facility amounting to $350 million, all of which was drawn by the end of the quarter. This facility is set to mature on March 31, 2025.
The company has also faced challenges in maintaining its credit ratings amid ongoing operational losses, with recent ratings reflecting a speculative-grade status due to financial instability.
How the Company Balances Between Debt Financing and Equity Funding
The company has been active in balancing its financing strategies, primarily relying on debt due to its negative equity position. The total stockholders' equity was reported at ($1,936.5 million). This negative equity raises concerns about the sustainability of operations and the ability to attract equity investment.
Management has indicated plans to improve liquidity through strategic debt financing and operational efficiencies, which may include additional debt issuance and restructuring efforts.
Financial Summary
| Financial Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $1,471 million | $1,439 million |
| Operating Loss | ($350 million) | ($134 million) |
| Net Loss | ($477 million) | ($204 million) |
| Loss Per Share | ($4.07) | ($1.94) |
The financial metrics indicate a deterioration in performance compared to the prior year, emphasizing the company's reliance on debt financing in a challenging environment.
Assessing Spirit AeroSystems Holdings, Inc. (SPR) Liquidity
Assessing Spirit AeroSystems Holdings, Inc. Liquidity
Current Ratio: As of September 26, 2024, the current ratio is calculated as follows:
| Current Assets ($ in millions) | Current Liabilities ($ in millions) | Current Ratio |
|---|---|---|
| 3,933.8 | 3,432.3 | 1.15 |
Quick Ratio: The quick ratio, which excludes inventory from current assets, is calculated as:
| Current Assets ($ in millions) | Inventory ($ in millions) | Current Liabilities ($ in millions) | Quick Ratio |
|---|---|---|---|
| 3,933.8 | 2,020.7 | 3,432.3 | 0.56 |
Working Capital Trends: The working capital has seen fluctuations, with current assets totaling $3,933.8 million and current liabilities at $3,432.3 million, resulting in a working capital of approximately $501.5 million.
Cash Flow Overview: The cash flow statement highlights the following trends:
- Operating Cash Flow: Cash used in operations for the nine months ended September 26, 2024, was ($1,258) million.
- Investing Cash Flow: Cash used in investing activities was ($106.7) million.
- Financing Cash Flow: Cash provided by financing activities totaled $764.8 million.
Potential Liquidity Concerns: As of the end of Q3 2024, the cash balance stood at $218 million, down from $824 million at year-end 2023. Total debt increased to $4,403 million, up from $4,084 million in 2023. The significant increase in debt and the reduction in cash reserves raise concerns regarding liquidity.
Strengths: The company has a backlog of approximately $48 billion, providing a solid revenue pipeline, which may help in managing liquidity pressures moving forward.
Cash Flow Summary:
| Cash Flow Components ($ in millions) | Q3 2024 | Q3 2023 | Nine Months Ended 2024 | Nine Months Ended 2023 |
|---|---|---|---|---|
| Cash used in Operations | (276) | (111) | (1,258) | (340) |
| Purchases of Property, Plant & Equipment | (47) | (25) | (107) | (77) |
| Free Cash Flow | (323) | (136) | (1,364) | (416) |
In summary, the liquidity and solvency analysis indicates significant challenges, particularly in cash flow management and the increasing debt burden, while the backlog provides a potential buffer against immediate liquidity pressures.
Is Spirit AeroSystems Holdings, Inc. (SPR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical metric for evaluating valuation. As of the third quarter of 2024, the company's diluted loss per share was ($4.07), indicating a negative P/E ratio, which traditionally complicates valuation assessments. The earnings for the same period reflect a significant net loss of ($1,508.9 million) compared to ($691.6 million) in the prior year.
Price-to-Book (P/B) Ratio
The P/B ratio is another important valuation metric. As of September 26, 2024, the company's total stockholders' equity was ($1,940.9 million), while the total assets were $7,049.2 million. Given that the company has negative equity, the P/B ratio does not provide a meaningful valuation indicator at this time.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of the latest financial statements, the enterprise value is calculated using market capitalization and total debt. With a total debt of $4,403 million as of September 26, 2024, and EBITDA figures reflecting significant operating losses, the EV/EBITDA ratio is not applicable due to the lack of positive EBITDA.
Stock Price Trends
Over the last 12 months, the stock price has exhibited volatility. The average stock price over the past year has ranged from approximately $25 to $15, with a current price of around $16 as of October 2024. This represents a decrease of approximately 36% from its peak.
Dividend Yield and Payout Ratios
The company has not declared any dividends in recent periods, reflecting a dividend yield of 0%. Given the current financial losses, no payout ratios are applicable.
Analyst Consensus on Stock Valuation
As of October 2024, analyst consensus reflects a cautious outlook with a consensus rating of Hold. The recommendations vary among analysts, with some suggesting potential for recovery based on backlog and future contracts, while others express concerns about ongoing operational challenges.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Negative Earnings) |
| P/B Ratio | N/A (Negative Equity) |
| EV/EBITDA Ratio | N/A (Negative EBITDA) |
| Total Debt | $4,403 million |
| Net Loss (Q3 2024) | ($1,508.9 million) |
| Stock Price (Current) | $16 |
| 12-Month Price Range | $15 - $25 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Spirit AeroSystems Holdings, Inc. (SPR)
Key Risks Facing Spirit AeroSystems Holdings, Inc.
The financial health of Spirit AeroSystems Holdings, Inc. is influenced by a variety of internal and external risk factors that can impact its operational performance and overall stability. Here, we break down some of the most significant risks facing the company as of 2024.
Industry Competition
Spirit operates in a highly competitive aerospace industry, facing pressure from both established players and new entrants. The competitive landscape requires constant innovation and efficiency improvements, which can strain resources. In the third quarter of 2024, the company reported an operating loss of ($350) million, compared to ($134) million in the same period of 2023, highlighting the challenges of maintaining profitability amidst competitive pressures.
Regulatory Changes
Changes in regulations related to safety, environmental standards, and trade policies can impose additional costs or operational constraints. The company is currently navigating a merger agreement with Boeing, which is under regulatory review. As part of this process, the Federal Trade Commission has issued a second request for information, potentially delaying the merger.
Market Conditions
The aerospace sector is sensitive to economic cycles. Economic downturns can lead to reduced demand for commercial aircraft, directly affecting Spirit's revenue. The company reported net revenues of $1.471 billion in Q3 2024, a slight increase from $1.439 billion in Q3 2023, but still facing challenges due to lower production volumes, particularly for the Boeing 737.
Operational Risks
Operational risks include supply chain disruptions, labor shortages, and production inefficiencies. Spirit has faced significant operational challenges, including net forward losses of $217 million attributed to production performance issues on the Boeing 787 and Airbus A220 programs. Excess capacity costs during Q3 2024 amounted to $70 million, exacerbating financial strains.
Financial Risks
Financial stability is a concern as the company reported a total debt of $4.403 billion as of September 2024, up from $4.084 billion at the end of 2023. Cash and cash equivalents fell to $218 million from $824 million over the same period, highlighting liquidity challenges. The company is also facing significant cash used in operations of ($276 million) in Q3 2024.
Strategic Risks
The ongoing merger with Boeing presents both opportunities and risks. The merger is expected to close in mid-2025, but it depends on various factors, including regulatory approvals and the successful divestiture of parts of Spirit's business. If the merger does not proceed as planned, it could adversely affect Spirit's market position and financial outlook.
Mitigation Strategies
To address these risks, the company is evaluating strategies to enhance liquidity, including potential customer advances and incremental debt financing. Management is also implementing operational efficiencies and cost-cutting measures, such as employee furloughs and hiring freezes, in response to the ongoing strike by Boeing employees.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pressure from established and new competitors | Operating loss of ($350) million in Q3 2024 |
| Regulatory Changes | Changes in safety and environmental regulations | Potential delays in merger approval |
| Market Conditions | Economic downturns affecting demand | Net revenues of $1.471 billion in Q3 2024 |
| Operational Risks | Supply chain disruptions and production inefficiencies | Excess capacity costs of $70 million |
| Financial Risks | High total debt levels and liquidity challenges | Total debt of $4.403 billion, cash down to $218 million |
| Strategic Risks | Risks associated with the Boeing merger | Potential adverse effects on market position |
Future Growth Prospects for Spirit AeroSystems Holdings, Inc. (SPR)
Future Growth Prospects for Spirit AeroSystems Holdings, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers that include product innovations, market expansions, and strategic partnerships. Notably, the backlog at the end of the third quarter of 2024 stood at approximately $48 billion, which includes work packages on all commercial platforms for both Airbus and Boeing.
Future Revenue Growth Projections
For the third quarter of 2024, net revenues were reported at $1.471 billion, a 2% increase from the previous year. For the nine months ended, revenues reached $4.665 billion, reflecting a growth of 10% year-over-year. Analysts are optimistic about future revenue growth driven by increased production activities across various commercial programs and defense contracts, particularly with the ongoing demand for the Sikorsky CH-53K program.
Earnings Estimates
Despite reporting a net loss of $1.509 billion for the nine months ending September 26, 2024, the company shows potential for recovery as operational efficiencies are targeted. The adjusted loss per share for the third quarter was $(3.03), compared to $(1.42) in the same quarter of the previous year.
Strategic Initiatives and Partnerships
The anticipated merger with Boeing, expected to close in mid-2025, is a significant strategic initiative that could enhance operational capabilities and market reach. This merger is poised to provide additional resources for innovation and expand the company's portfolio. Additionally, the company is exploring partnerships to enhance liquidity and operational efficiency, including customer advances and potential debt financing.
Competitive Advantages
The company maintains several competitive advantages that position it favorably for future growth. Its extensive backlog and established relationships with major customers such as Boeing and Airbus provide a solid foundation for revenue. Furthermore, the Defense & Space segment reported a revenue increase of 12.4% in the third quarter of 2024, reflecting strong demand in defense contracts.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Revenues | $1.471 billion | $1.439 billion | 2% |
| Operating Loss | $(350 million) | $(134 million) | |
| Net Loss | $(477 million) | $(204 million) | |
| Adjusted Loss Per Share | $(3.03) | $(1.42) | |
| Backlog | $48 billion | N/A | N/A |
In summary, the combination of a robust backlog, strategic mergers, and targeted operational improvements positions the company for potential growth in the coming years, despite current operational challenges.
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Article updated on 8 Nov 2024
Resources:
- Spirit AeroSystems Holdings, Inc. (SPR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Spirit AeroSystems Holdings, Inc. (SPR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Spirit AeroSystems Holdings, Inc. (SPR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.