Spirit AeroSystems sees lower revenue but higher profit

A second-quarter dip in revenue wasn’t enough to offset a bigger gain in profit at Spirit AeroSystems, which on Wednesday released its financial results for the three-month period ended June 30.

Spirit said revenue for the quarter totaled $1.69 billion, down 6 percent from $1.8 billion in the same period a year ago. Net income at the Wichita-based supplier of aircraft structures was $155 million in the second quarter of 2015, up 8 percent from net income of $143 million in the second quarter of 2014.

Spirit attributed the lower revenue to the divestiture of its work on the Gulfstream business jet wing program to Triumph Group, which was completed in January. Officials also attributed the revenue dip to its costs on the Boeing 787 program.

Spirit officials had warned in the first quarter of 2015 of “step-down pricing” on the 787. That is, as Spirit delivers more 787 components, or shipsets, the amount of money it receives for them decreases because it is assumed contractually that its costs of making those shipsets decline as well.

“Our intention clearly is to work on cost reductions,” Spirit chief financial officer Sanjay Kapoor said of the 787 program on a conference call with analysts Wednesday.

Spirit CEO Larry Lawson noted on the call that in the second quarter of 2015, the company delivered “a record” 34 787 shipsets as well as a record nine Airbus A350 shipsets.

Total shipsets delivered by Spirit in the second quarter of 2015 were 154, compared with 163 in the second quarter of 2014. The biggest year-over-year decline in shipsets was in business and regional jets, the company said, down by 17 between the second quarters of 2014 and 2015. That was likely attributable to the absence of the Gulfstream work.

Spirit’s backlog at the end of the second quarter was $47 billion, up from $46 billion in the first quarter, and flat to the fourth quarter of 2014.

Lawson said a key focus for the company in the quarters ahead would be preparing for rate increases on several commercial airplane programs, including Boeing’s 737 and 787 and Airbus’ A320 and A350. That preparation will include an increase in capital spending in the second half of 2015 to accommodate the future uptick in production, he said.

The company also said Wednesday that its board of directors authorized a share repurchase program of up to $350 million.

Despite the lower revenue and effects of step-down pricing on the 787, analysts were largely complimentary of the company’s performance.

Cowen & Co. analyst Cai von Rumohr congratulated Lawson and Kapoor on the call and said Spirit turned in “very good” second-quarter results.

“This was another solid operational quarter for (Spirit), and the beat and raise to FCF (free cash flow) plus the announcement of a buyback demonstrates the company’s transition into a solid, predictable operator,” RBC Capital Markets analyst Steven Cahall wrote in a Wednesday morning note to investors.

This story was originally published July 29, 2015 at 7:50 AM with the headline "Spirit AeroSystems sees lower revenue but higher profit."