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Analysts told investors the firm sees a hard path for 7% to 9% cash margins for the company, and they see 5% as more realistic.
“Despite strong results in defense and aftermarket, we continue to see Spirit AeroSystems (ticker: SPR) as a 737 story,” explained Epstein. “While looming 737 production ramp is expected to unlock significant operational improvements, the recent issues with non-conforming vertical fin attach-fittings since 2019 shows important performance issues at current rates.”
“We expect SPR to be able to generate FCF at 5% of sales by mid-2020s, short of 7-9% conversion target,” the analysts added.
They also noted that the company’s free-cash-flow margins are further pressured by ongoing labor negotiations, the overly optimistic turnaround in cash-losing programs, and continued challenges in the supply chain.
