Spirit AeroSystems (NYSE:SPR) was cut to Neutral from Buy at Goldman Sachs on Thursday, with analysts maintaining a $30 price target on the stock.
They told investors that the company's medium-term profitability and free cash flow are worse than it thought.
SPR shares plunged over 27% Wednesday after missing earnings expectations. It is down a further 4% so far on Thursday, currently trading at $21.77 per share.
The aerostructures manufacturer reported a loss per share of $1.46, $0.78 worse than the analyst estimate of a loss of $0.68 per share. Revenue for the quarter came in at $1.4 billion versus the consensus estimate of $1.31B.
"Our thesis on SPR has been trough new aircraft production rates would increase to satisfy strong aircraft demand, and that would flow to the Spirit top-line, margins and cash flow," wrote the analysts. "It is increasingly looking like that will flow to the SPR top-line, but less to margins and cash flow."
"It is not entirely clear to us why profitability is proving much tougher at SPR than at others in the sector; but labor, cost inflation, supply chain, and product quality are adding up to substantially eat into unit economics."
Goldman still sees "significant long-term upside potential" in the stock but said their visibility into medium-term financials is now also very low, and they recommend investing in aerospace through other names.