2 Companies Disappoint Wall Street, Only 1 Plunges 22%

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is trading 166 points higher today, or 1.08%, at 3 p.m. EST after initial unemployment claims and earnings data hit the news feeds. Initial unemployment claims fell by 20,000 to 331,000 last week, a slightly larger drop than anticipated. Tomorrow will bring new data on U.S. payroll and unemployment. Meanwhile, some companies are making big moves after earnings reports.

Outside the Dow, Spirit AeroSystems Holdings  (NYSE: SPR  )  plunged 22% after it reported a net loss in the fourth quarter stemming from charges related to its program for supplying parts to the Boeing 787 Dreamliner. Spirit reported a net loss of $587 million, or a whopping $4.15 a share, compared with a net income of $61 million, or $0.43 per share, during the same period last year. Despite the rough quarter and stunning charges recorded, President and CEO Larry Lawson said he sees hope.

"We are entering 2014 with a strong cost discipline and relentless focus on performance and accountability that should begin to yield consistent cash generation," Lawson said in a press release.

There's no doubt that the fourth quarter was rough, but this 22% sell-off may give some investors reason to jump in to Spirit. Boeing still has plenty of demand for its 787 Dreamliner, and has just recently upped the production rate of the airplane, which should help Spirit grow its revenue going forward.

Furthemore, strong growth is projected over the next two decades in the world's single-aisle commercial airplane market -- an area where Spirit has consistently delivered strong operating margins. Those two factors may help Spirit rebound both its top and bottom lines over the long term. With 2013 in the books ending on a sour note, Spirit expects revenue of $6.5 billion to $6.7 billion and earnings per share between $2.50 and $2.65 in 2014.

Today also brought Wall Street disappointing results from once-troubled automaker General Motors (NYSE: GM  ) . America's largest automaker reported 2013 net income, attributable to common shareholders, of $3.8 billion, or $2.38 per fully diluted share -- down from $4.9 billion, or $2.92 per share, in 2012. Initially, the results sent General Motors trading nearly 4% lower in pre-market trading; however, as the day progressed, the company's stock rebounded to 0.7% in the green in late trading.

The main thing for long-term investors to remember here is that while General Motors did receive major benefits from its unique bankruptcy, it still owned the industry's least fresh portfolio of vehicles. The company's program to replace, redesign, or refresh 90% of its vehicles by the end of 2016 comes at a cost to its bottom line.

Another thing for investors to consider is that GMIO, its "international operations" catchall region, is its second most profitable region and was severely crippled by a weaker yen that allowed Japanese automakers to surge back after a yearlong backlash from Chinese consumers regarding a territorial dispute.


Source: General Motors fourth quarter presentation.

Investors who were fooled once during GM's bailout are correctly cautious in not wanting to be fooled twice. However, I believe there is much upside for General Motors as it continues to improve profitability in its two strongest regions: GMNA, and GMIO. Look for its refreshed full-size pickups to help drive margins and average transaction prices in the U.S. higher, as well as a surging Cadillac lineup to do the same overseas. While much upside exists, investors should note that GM is a long-term play in a cyclical industry that will require patience. 

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Related Tickers

10/22/2014 10:25 AM
^DJI $16632.53 Up +17.72 +0.11%
DOW JONES INDUSTRI… CAPS Rating: No stars
GM $31.24 Up +0.40 +1.28%
General Motors CAPS Rating: **
SPR $37.53 Down -0.25 -0.66%
Spirit AeroSystems… CAPS Rating: ***

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