Shares of Spirit lost almost 20% of their value on Thursday after the Wichita, Kan.-based supplier reported a fourth-quarter loss and warned that 2014 results would be softer than expected. Spirit in the fourth quarter reported a loss of $4.15 per share on a bevy of charges and said it expects to earn between $2.50 and $2.65 per share in the current year, compared to earlier expectations of $2.68 per share.
Spirit has been a "wait and see" story for some time, full of promise as a supplier of key components for Boeing (BA) and Airbus Group NV jets that are in high demand as airlines attempt to refresh their fleets with more fuel-efficient planes. But Spirit has been weighed down by other units that have been a drain on profitability.
The company, spun out of Boeing in 2005, has been seeking buyers for business jet operations that account for about 16% of annual sales but have been bleeding cash. Sources in December said the Morgan Stanley-run auction has attracted an encouraging amount of interest, leading many to hope the worst was behind Spirit.
The latest results throw those assumptions into doubt, erasing nearly four months of stock gains in the process. Investors sent shares down $6.46 apiece, to $26.51 on Thursday afternoon on worries that the company's roll as a supplier on Boeing's popular 787 airframe and Airbus' A350 are not coming in as hoped.
Sterne Agee Group Inc. analyst Peter Arment said that while that initial revamp is largely complete, new questions have emerged. "Large charges on the 787 were unanticipated and the lack of mention of the A350 leaves significant future program risk," Arment wrote.
Spirit in the quarter took a $385 million charge on the 787 program, and analysts have expressed concern that a push by Boeing to cut its costs could trim margins for suppliers.
Company bulls continue to believe a turnaround is at hand. Jefferies LLC analyst Howard Rubel called the magnitude of the program charges "stunning" but said "we believe there is a definite plan to kill risk."
The question is how long investors will be willing to wait for a turnaround. A number of hedge funds, including Scopia Capital Management LLC, Eton Park Capital Management LP and Greenlight Capital Inc., already own shares. If management can't get Spirit soaring, chances grow that someone else will want to give it a try.