On Tuesday, CFRA, a prominent financial research firm, raised the price target for Spirit AeroSystems (NYSE: NYSE:SPR) shares to $37 from the previous target of $36, while maintaining a Hold rating on the stock. The adjustment reflects the ongoing terms of the acquisition agreement with Boeing (NYSE: NYSE:BA), a key original equipment manufacturer (OEM).
Spirit AeroSystems has agreed to an all-stock purchase by Boeing, with the transaction currently valued at approximately $37.25 per share. The deal includes a collar on the exchange ratio to ensure that the value for Spirit AeroSystems' shareholders remains around $37, unless Boeing's stock falls below $149.00 per share or rises above $206.94 per share. The acquisition is anticipated to be finalized by the middle of 2025.
The financial research firm noted that Spirit AeroSystems is expected to operate at a loss in 2024 and hasn't recorded a profitable year since 2019. Despite this, the deal price signifies a premium of more than 30% above Spirit's share price in late February, when both companies confirmed that discussions about the deal were taking place.
The price offered for the deal implies a 22.5 times multiple of the firm's estimated earnings per share (EPS) for 2025, which is slightly below Spirit's long-term historical average for forward earnings. The financial research firm views the acquisition as a strategic move, particularly considering the potential challenges Boeing may face with its delivery schedule in the near term, which would likely impact key suppliers like Spirit AeroSystems.
In other recent news, Boeing has reached an agreement to acquire Spirit AeroSystems in an all-stock transaction valued at $4.7 billion. This move is expected to assist Boeing in addressing quality control issues with its 737 MAX aircraft.
Concurrently, Airbus has announced its intention to acquire loss-making operations from Spirit AeroSystems, including facilities in the United States, Northern Ireland, France, and Morocco. Both these acquisitions are part of significant recent developments in the aerospace sector.
In the context of these deals, Deutsche Bank and TD Cowen have maintained their 'Buy' ratings on Boeing's stock. Deutsche Bank's rating came with a steady price target of $225.00, while TD Cowen set a price target of $230.00, citing the potential productivity enhancements from Boeing's proposed acquisition of Spirit AeroSystems.
Despite the strategic acquisitions, investors should note that the finalization of both deals is pending due diligence. These recent developments are anticipated to reshape the aerospace industry, with Airbus and Boeing securing key components for their aircraft production and strengthening their respective supply chains.
InvestingPro Insights
As Spirit AeroSystems (NYSE: SPR) navigates its acquisition agreement with Boeing, recent data from InvestingPro provides a snapshot of the company's current financial health. The market capitalization stands at $3.96 billion, indicating the size of the company in the context of the broader market. Despite a challenging period, Spirit AeroSystems has seen its revenue grow by 19.54% over the last twelve months as of Q1 2024, reflecting the company's ability to increase sales amidst a difficult operating environment. This growth, however, is juxtaposed with a negative gross profit margin of -3.62%, underscoring the struggles the company faces in converting sales into gross profit.
Two critical InvestingPro Tips highlight the company's financial challenges: Spirit AeroSystems operates with a significant debt burden and may have trouble making interest payments on its debt. Additionally, analysts have revised their earnings downwards for the upcoming period, and the stock price has been quite volatile. These factors are essential considerations for investors, especially in the context of the acquisition by Boeing. For those looking to delve deeper, there are over 10 additional InvestingPro Tips available that could provide further insights into Spirit AeroSystems' financial outlook.
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