Spirit AeroSystems Receives Upgraded ‘Outperform’ Rating from Wolfe Research

Spirit AeroSystems Holdings, a prominent player in the aviation manufacturing sector, received an upgraded rating to ‘Outperform’ from the previous ‘Peer Perform’ by Wolfe Research analysts on Thursday. The upgrade comes as Spirit AeroSystems shows promising financial improvement and benefits from robust demand for jets, including Boeing’s 737 Max.

Myles Walton, an analyst at Wolfe Research, highlighted the significant strides made by Spirit AeroSystems in a report dated November 9. “While Spirit may not be fully out of the woods, the progress made over the past month, coupled with a still strong market environment – notably with increasing Boeing 737 Max deliveries – bolsters our confidence to advocate for the stock at its current levels,” Walton stated.

In a strategic financial move, Spirit AeroSystems announced plans this week to raise $400 million through stock sales and convertible debt. The company is also proactively refinancing $1.2 billion in long-term debt, extending its maturity from 2025 to 2030. This financial restructuring signifies Spirit’s commitment to solidifying its market position.

Further enhancing its operational stability, Spirit AeroSystems has successfully renegotiated its contract with Boeing to account for inflation and other cost pressures. The company is also in talks with European aerospace giant Airbus for a similar agreement. These renegotiations are crucial as both Boeing and Airbus ramp up production to meet airline demands for newer aircraft fleets amid a surge in global air travel.

Wolfe Research has set a price target of $34 per share for Spirit AeroSystems, adopting a novel valuation approach. Moving away from the traditional price-to-earnings ratio, the firm is now employing an enterprise value method, roughly 8 times the projected EBITDA of $887 million for 2025.

However, Wolfe Research cautions that their stance on Spirit AeroSystems could shift negatively if the company encounters significant new production issues, experiences delays in production ramp-up, or struggles with cash burn due to increased costs or challenges in renegotiating their Airbus contract.

Sources: AirGuide Business airguide.info, bing.com, Wolfe Research