Give Spirit AeroSystems (NYSE:SPR) credit for recovery; in the closing minutes of Thursday’s trading, it was down a little over 1.5%. That’s a far cry from its Wednesday performance, where it was down 27%. The reasons behind the plunge and slight slip, however, are bad enough for any investor to willingly countenance: analyst downgrades and problems with its cash flow.
The downgrade came from Goldman Sachs, who dropped Spirit from Buy to “neutral,” citing a combination of cash flow issues and profitability. Apparently, conditions of both were “worse than we thought,” noted Goldman Sachs analysts. One in particular, Noah Poponak, noted that it wasn’t “…entirely clear to us why profitability is proving much toughter at Spirit than at others in the sector,” but noted that the factors that are hitting many others in the field—supply chain issues, labor costs, and so on—are all hitting Spirit too. Poponak also chided Spirit for a lack of “…visibility into medium-term financials….”
The numbers Spirit did bring out, meanwhile, were catastrophic. Not only did it reveal a loss of $105 million producing Boeing (NYSE:BA) and Airbus (OTHER OTC:EADSY) aircraft, but also, it showed off a cash flow picture that some deemed “bleak.” Analysts were quick to pounce on the board, wondering what solutions for the frantically rising cash burn rate—projected between $200 million and $250 million against earlier projections of about half that—would look like. For what it was worth, Spirit did have some solutions in mind, starting with an overall “sense of urgency” among its C-suite.
That urgency didn’t extend to investors, and analysts aren’t exactly on board either. With five Buy ratings, six Hold and two Sell, Spirit AeroSystems stock is considered a Hold. However, for adventurous investors, Spirit AeroSystems stock does offer a 38.13% upside potential on an average price target of $30.83.
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