On Thursday, Benchmark downgraded Spirit AeroSystems (NYSE:SPR) stock from Buy to Hold, citing the potential acquisition by Boeing (NYSE:NYSE:BA) as a factor already reflected in the stock's price.
The aerospace manufacturer, which has been facing production challenges with its 737-MAX and 787 programs, is also dealing with complications related to its Airbus assets.
The Benchmark analyst highlighted that Spirit AeroSystems' Airbus-related assets are currently operating at a loss. Moreover, Airbus seems unlikely to facilitate Boeing's acquisition by offering a premium for these assets.
This stance comes at a time when increased safety scrutiny is paramount, and recent Congressional comments have underscored the importance of reliable manufacturing practices.
The acquisition of Spirit AeroSystems is considered a component of Boeing's commitment to the Federal Aviation Administration (FAA) to enhance quality standards. However, Airbus's negotiating strategies may cause Boeing to postpone the takeover.
Additionally, the financials of Spirit AeroSystems as an independent entity, particularly its free cash flow (FCF) profile, are difficult to ascertain, as evidenced by Boeing's recent $425 million production support payment to the company.
The analyst concluded that while Boeing's acquisition of Spirit AeroSystems and Airbus's control over the related assets would be beneficial for all parties involved, including the industry and the FAA, the intricate dynamics at play have led to a neutral stance on the stock.
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