Assessing Dinakar Singh and TPG-Axon’s 4Q13 positions

Part 5
Assessing Dinakar Singh and TPG-Axon’s 4Q13 positions (Part 5 of 7)

TPG-Axon Capital Management buys a position in Spirit Aerosystems

TPG-Axon Capital Management and Spirit Aerosystems

TPG-Axon Capital Management’s notable positions traded last quarter include new stakes in Equinix Inc. (EQIX), Huntsman Corp. (HUN), Hertz Global Holdings Inc. (HTZ), and Spirit Aerosystems (SPR) as well as sold positions in in Twenty-First Century Fox-A (FOXA) and CONSOL Energy Inc. (CNX).

TPG-Axon established a new position in Spirit Aerosystems (SPR) that accounts for 3.27% of the fund’s 4Q portfolio.

SPREnlarge Graph

Spirit Aerosystems is one of the largest independent non-OEM aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing (BA) and Airbus (EADSF). Aerostructures are structural components such as fuselages, propulsion systems, and wing systems for commercial and military aircraft. Boeing and Airbus are the two largest aircraft OEMs in the world.

Spirit Aerosystems beat earnings estimates but reported a net loss for 4Q 2013 of $587 million, or $4.15 per share, compared to net income of $61 million, or $0.43 per share, in the same period of 2012. The current quarter included net pre-tax $546 million, or $2.42 per share, of forward loss charges, principally on the Boeing 787 Dreamliner program. Results also included a negative impact of $381 million following the establishment of a valuation allowance against U.S. net deferred tax assets. Revenues were up 5% to $1.5 billion.

Fuselage Systems segment revenues for the fourth quarter of 2013 were $700.8 million, up 3% from the same period last year on increased production volumes. Propulsion Systems segment revenues for the fourth quarter of 2013 were $398.2 million, up 8%, while Wing Systems segment revenues for the fourth quarter of 2013 were $392.8 million, up 5%.

Management said 2013 was a transformational year and that it’s “entering 2014 with a strong cost discipline and relentless focus on performance and accountability that should begin to yield consistent cash generation.” Spirit said in the earnings release that it’s working on the sale of its Oklahoma operations and focusing on reduced costs.

SPR hedgeEnlarge GraphSpirit said revenue for full-year 2014 is expected to be between $6.5 billion and $6.7 billion based on Boeing’s 2014 delivery guidance of 715 to 725 aircraft and expected Airbus deliveries in 2014 at a similar level to those in 2013.

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