Spirit AeroSystems Holdings Inc (SPR.N), a major supplier of aircraft components to Boeing Co (BA.N) and Airbus (AIR.PA), reported a surprise loss for the fourth quarter on charges tied mainly to the Boeing (BA.N) 787 Dreamliner program, sending its shares down about 22 percent.
The Wichita, Kansas, maker of fuselage and wing systems also forecast 2014 earnings below analyst estimates.
The unexpected loss on Thursday follows a series of stumbles by Spirit in recent years, caused by cost overruns and underpricing of contracts that have hurt its profitability.
During its earnings conference call, the company tried to reassure analysts that it was taking steps to stem the tide of big charges. Spirit AeroSystems has cut jobs and put certain assets up for sale since former Lockheed Martin executive Larry Lawson was named chief executive last year.
"We're trying to make smart decisions as it relates to going forward in terms of the type of work we get involved in and then our ability to estimate that work and make sure that the jobs we take on align with our core competencies," Lawson said during the call.
Still, RBC Capital Markets analyst Steven Cahall said Spirit's comments on the call that it had lowered pricing in Boeing contracts did not bode well.
"The 787 program is already zero margin so if SPR can't hit its 787 cost targets in time then there are further charges ahead," Cahall said in a note to clients.
Other analysts said they had concerns about the charges for the Airbus A350 program that were not addressed on the call. Spirit makes pieces for the fuselages and wings of the new plane, due to enter service this year.
Airbus, however, said it sees no problems with the ability of the company to supply the components.
"We are very comfortable," said Daniel Wenninger, senior director of the A350 program in the U.S. He said he doesn't expect problems with deliveries or with Spirit's ability to meet Airbus' schedule to meet A350 production targets.
Wenninger said Airbus was not considering alternative suppliers or taking the work in house.
Cahill also noted from Spirit's comments on the call that while the company was trying to sell the Oklahoma operations it put up for sale six months ago, Spirit could also keep the assets. The Oklahoma operations, which also produce wing components for Gulfstream business jets, have been largely to blame for $1 billion in Spirit losses since October 2012.
Cahall said the commentary could indicate potential buyers aren't willing to pay Spirit's price for the Oklahoma assets or signal a change of mind regarding a sale. "Either way we think the divestiture is seen as a significant future catalyst, the loss of which is incrementally negative," Cahall's note added.
Spirit's fourth quarter was hurt by pretax charges of $546 million, or $2.42 a share, tied to expected costs on the 787 Dreamliner. The company also recorded costs of $381 million, or $2.69 a share, related to deferred tax assets.
Spirit said the 787 charge was intended to cancel out certain expected forward losses related to the Boeing program — an agreement to settle claims associated with the production of the Dreamliner.
Spirit reported a net loss of $587 million, or $4.15 per share, for the fourth quarter, compared with a profit of $61 million, or 43 cents per share, a year earlier.
Adjusted for items, the company had a profit of 65 cents a share in the latest period, a result in line with what analysts expected on average, according to Thomson Reuters I/B/E/S.
Quarterly revenue rose 5 percent to $1.49 billion.
Costs spiraled for Spirit, spun off from Boeing in 2005, when the company started supplying parts for business jets along with commercial planes.
Spirit said it expects 2014 earnings of $2.50-$2.65 per share. Analysts on average expected profit of $2.68.
Spirit shares, among the percentage loss leaders on the New York Stock Exchange, slumped 21.7 percent, or $7.15, to $25.82 in afternoon trading.
(Reporting by Sagarika Jaisinghani in Bangalore, Karen Jacobs in Atlanta and Alwyn Scott in Seattle; Editing by Sriraj Kalluvila, Andrew Hay and Chris Reese)