Spirit AeroSystems shares were down 4% on Thursday, down another 4% a day after the aerospace manufacturer revealed significant costs related to a recent strike and new labor agreement.
Shares were down 27% on Wednesday as executives detailed a laundry list of problems. The maker of major components for all Boeing jetliners announced a faster-than-expected cash burn rate and $105 million in losses on Boeing and Airbus aircraft production during the second quarter.
Management said ongoing supply chain instability, inflation and rising labor costs would continue to hurt the bottom line. In the second quarter, Spirit said it burned through $211 million of cash, adding that cash flow will not recover until the 2024 - 2025 time period.
The stock has lost about a third of its value in two days. On Friday, shares closed down 4.3% to $21.86 a share.
The company also said it may look to refinance its debt due in 2025. Spirit's bonds are junk-rated by major rating agencies.
We believe the lack of core cash generation will not enable management to delever as fast as we had previously anticipated, said Michael Ciarmoli, an analyst at Truist Securities.
Spirit is a top performer in the aerospace industry. In 2005, Boeing was spun off from the company, and continues to make substantial parts of all Boeing jetliners, including the entire 737 fuselage. In recent years, the company has broadened its client base to include Airbus and as a supplier for defense contracts.
There is really no alternative supplier for much of what it does if the OEMs original equipment manufacturers do not want to take on the work themselves, Seifman said in a note to investors.
Analysts questioned whether Spirit would have to renegotiate labor contracts with Boeing and Airbus. Seifman said it is still unknown what Boeing will do to help Spirit improve its financial health. Airbus said it has an in-house aerostructures capabilities and is less reliant on Spirit.
In addition, Ken Herbert, an analyst with RBC Capital Markets, said Spirit is unlikely to see near-term pricing relief, given supply chain pressures and its fixed-price contracts.
He added that instead of contributing customer advances, Boeing and Airbus are likely to continue to contribute customer advancements, allowing Spirit to benefit only as production rates improve.
Spirit's ability to generate cash could be a crucial factor in whether it's able to achieve favorable terms in terms of refinancing the company, Cowen analyst Cai Von Rumohr said. Refinitiv Eikon said that the company has $1.2 billion in outstanding bonds that are set to mature in April 2025.