Fundamental analysis
Spirit AeroSystems (SPR) was formed in 2005 when Boeing divested this division to the Onex Corporation investment fund. SPR is a manufacturer of aircraft parts for large transport aircraft. It manufactures the fuselage for the Boeing 737 and 787 aircraft, as well as several cockpit parts. It also manufactures wing parts for competitor Airbus (A350 and A220 models). The company came to prominence a few months ago due to the poor reputation of the quality of the B737 fuselage and a rail accident in which several finished fuselages fell into a valley. Both of these reports had a major negative impact on B737 production.
Over the last 12 months, the share price has only risen 11%, but due to the price drop during 2023, the price has risen 130% over the last 6 months. In the last few days, an official report has surfaced that Boeing is in talks to buy back SPR. This drove the price up nearly 10% in a single trading day.
The company’s turnover is growing as the number of B737 fuselage deliveries increases. 85% of sales come from Boeing. 11% are then from Airbus.
For 2023, the company’s turnover is $6 billion on a loss of $616 million.
Currently, the company has orders worth about USD 49 billion from both Boeing and Airbus.
The company has USD 42 million in cash.
Results
In its latest report, the company declined to comment on the outlook for its business due to ongoing negotiations with Airbus, and most importantly, restrictions on B737 production by US regulators. The company is also in talks with regulators about a possible increase in B737 fuselage production.
Technical analysis
The moving averages crossed at the end of December 2023 and since then the company has been in moderate growth.
The RSI is in the neutral zone.
PE is at an extremely high level of 111.
Volume is over 3.5 million shares per day.
The share price is well below its highs. Thus, the price may be constrained by resistances in its potential growth.
Conclusion
Despite all the problems, Spirit AeroSystems is a monopoly and has a dominant position in the production of aerospace components. Boeing is unable to replace this company. The company’s turnover and revenue is primarily based on the number of B737 fuselages delivered. Currently, there are many unknowns surrounding the production of this aircraft. Quality is not high, the regulator has limited production. If production is increased, the company will do better. However, if there is no increase or perhaps production is reduced, this may impact the company’s performance.
And then there is the possibility that SPR will be bought back by Boeing. The announcement of the deal had a big impact on the price. But the outcome cannot be predicted. Spirit is a big company and Boeing is not in a good financial position either.
Sources
https://seekingalpha.com/symbol/SPR
https://finance.yahoo.com/quote/SPR?.tsrc=fin-srch
https://investor.spiritaero.com/filings-financials/QuarterlyResults/default.aspx
https://s23.q4cdn.com/405433451/files/doc_financials/2023/q4/Updated/SPR-2023-Q4-Press-Release-Final.pdf
https://en.wikipedia.org/wiki/Spirit_AeroSystems