David E. Strauss, an analyst from Barclays, maintained the Buy rating on Spirit AeroSystems (SPR – Research Report). The associated price target is $40.00.
David E. Strauss has given his Buy rating due to a combination of factors influencing the potential acquisition of Spirit AeroSystems by Boeing. Strauss identifies the Federal Aviation Administration’s (FAA) encouragement of Boeing to take control of a critical supplier as a key reason for the possible deal. He implies that the FAA’s influence and the ongoing investigation into the MAX production substantially increase the likelihood of Boeing’s acquisition of Spirit AeroSystems. Moreover, Strauss suggests that the acquisition could be a strategic move to address underlying operational issues within Spirit AeroSystems that may be more severe and longer-term than previously anticipated.
Furthermore, Strauss assesses the potential financial implications of the transaction, estimating Spirit AeroSystems’ enterprise value on a normalized basis, excluding Airbus programs, to be in the range of $7-8 billion. He notes that Boeing has the financial capacity to complete the transaction with its available cash and financing options, although a mixed payment with equity might be preferable given Boeing’s leverage. Despite acknowledging that the acquisition may not be immediately accretive and could initially slow the MAX production ramp, Strauss believes that in the long run, it would enhance Boeing’s supply chain control and regulatory relationships, ultimately supporting the achievement of production targets in the coming years.
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Spirit AeroSystems (SPR) Company Description:
Spirit AeroSystems Holdings, Inc. engages in the design and manufacture of aero structures for commercial and defense aircraft. It operates its business through the following segments: Fuselage Systems, Propulsion Systems, and Wing Systems. The Fuselage Systems segment develops, produces and markets forward, mid, and rear fuselage sections and systems. The Propulsion Systems segment offers struts or pylons, nacelles, and related engine components. The Wing Systems segment includes the development, production, and market of wings, wing components, and other miscellaneous structural parts to primarily aircraft original equipment manufacturer, related spares, and maintenance, repair, and overhaul services. The company was founded on February 7, 2005 and is headquartered in Wichita, KS.
Read More on SPR:
- Spirit AeroSystems Confirms Discussions with Boeing
- Spirit AeroSystems confirms discussion with Boeing
- Boeing confirms ‘preliminary discussions’ with Spirit AeroSystems
- Boeing paying premium for Spirit AeroSystems ‘seems unlikely,’ says Truist
- Jefferies says buying Spirit likely not what Boeing holders want
