Spirit AeroSystems upgraded to Outperform at Wolfe Research

Spirit AeroSystems Holdings (NYSE:SPR) on Thursday was upgraded to Outperform from a previous rating of Peer Perform by analysts at Wolfe Research. They said the maker of plane parts is poised for gains after improving its finances and as demand for jets such as Boeing’s (NYSE:BA) 737 Max remains strong.

“While Spirit (SPR) may not be fully out of the woods, what they have accomplished over the last month combined with a still strong environment (and in some places like Max deliveries getting stronger) gives us the confidence to step in at the current levels,” Myles Walton, analyst at Wolfe Research, said in a November 9 report.

Spirit (SPR) this week announced a plan to raise $400 million through a sale of stock and convertible debt. It also is refinancing $1.2 billion in long-term debt, pushing its maturity from 2025 to 2030.

Spirit (SPR) renegotiated its contract with Boeing (BA) to adjust for inflationary pressures and other costs. The company is working on a similar agreement with European plane-maker Airbus (OTCPK:EADSY) (OTCPK:EADSF). Both aircraft manufacturers have worked to boost output as airlines order new planes to replace aging ones and to keep up with surging demand for air travel.

Wolfe Research set a price target of $34 a share on Spirit (SPR), based on a new valuation method. Instead of price-to-earnings, Wolfe is applying an enterprise value that’s about 8 times estimated ebitda of $887 million for 2025.

“We could become more negative on shares if new significant production quality issues arise, the production rate ramp is meaningfully delay, or if cash burn is significantly worse than expected due to higher costs and/or inability to renegotiate their contract with Airbus (OTCPK:EADSY) (OTCPK:EADSF),” Wolfe Research said.

Wolfe Research's estimates for Spirit AeroSystems Holdings (SPR), November 9
	Adjusted, diluted earnings (loss) per share
	New		Old
2023E	-$2.42		-$2.45
2024E	-$0.12		-$0.06
2025E	$1.63		$1.86