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Spirit AeroSystems (NYSE:SPR) on Thursday was upgraded to Outperform from a previous investment rating of Neutral by analysts at financial-services company Baird. They said the maker of aircraft parts is poised to improve its cash flow with recent operational changes.
“The increased focus on execution and costs by CEO Pat Shanahan, coupled with higher volumes, supports an improving outlook for Spirit’s (SPR) financial performance,” Peter Arment, analyst at Baird, said in a November 30 report.
Spirit (SPR) would benefit from renegotiated contracts with European plane maker Airbus (OTCPK:EADSY) (OTCPK:EADSF), according to Baird. Spirit’s (SPR) management expects a revised supplier agreement with Airbus (OTCPK:EADSY) (OTCPK:EADSF) by February.
In October, Spirit (SPR) signed a pact with Boeing (NYSE:BA) to strengthen their relationship while improving production and quality. The agreement gave Spirit (SPR) more financial flexibility by offering a higher price for each 787 Dreamliner fuselage in the near term and a cut in 737 unit prices later in the decade. Boeing (BA) agreed to extend repayments on $180 million of financing, and provide an additional $100 million to Spirit (SPR) to retool its factories.
Baird raised its price target on Spirit (SPR) to $36 a share from $30 a share previously, based on an estimated enterprise value that’s 10 times earnings before interest, taxes, depreciation and amortization for 2024.
“Sentiment is improving on Spirit (SPR), and we see an opportunity for multiple expansion in 2024, especially if unit economics on Airbus (OTCPK:EADSY) (OTCPK:EADSF) shipsets can be achieved through a revised production contract,” according to Baird.
