On Tuesday, UBS reaffirmed its Buy rating and $240.00 price target for Boeing (NYSE:BA), in light of reports suggesting an imminent equity-funded acquisition of supplier Spirit Aerosystems. The deal is said to be valued at $35 per share, which would slightly exceed $4 billion, though no financial terms for the Airbus operations exit have been disclosed. This strategic move is anticipated to bolster stakeholder confidence in the safety and quality improvements of Boeing's MAX aircraft.
The potential acquisition by Boeing of Spirit Aerosystems' Boeing-related work follows confirmation from the involved parties that discussions are ongoing. The price per share for Spirit Aerosystems has garnered attention, with initial investor expectations above $40 per share adjusting due to recent program setbacks for both Boeing and Airbus. The use of equity funding for the transaction is expected to strengthen Boeing's liquidity position and alleviate some stress on its investment-grade credit rating.
Boeing's financial strategy includes a projection of $12.8 billion in cash reserves at the end of the second quarter, after completing a $10 billion debt raise and accounting for an anticipated second-quarter cash burn of $4.1 billion. The company is expected to resume positive cash flow in the second half of 2024, with an estimated $6.3 billion in cash generation. The acquisition would likely result in Boeing assuming Spirit Aerosystems' $4.1 billion debt.
The market has been anticipating some level of dilutive equity issuance from Boeing as a possible funding method. While such an issuance could provide a cash buffer for Boeing, it is not expected to completely mitigate the financial risks until the company returns to consistently positive cash flow. Further details on the transaction are awaited in the near future, as stakeholders evaluate the impact of this development on Boeing's financial trajectory.
In other recent news, Boeing Co . has proposed to acquire Spirit AeroSystems (NYSE:SPR) Holdings Inc for $35 per share, a move aimed at strengthening its supply chain for critical aircraft components. Meanwhile, the company is also in the spotlight for its role in the Patriot missile defense system, which is seeing increased demand amid the Ukraine conflict. Boeing is responsible for the sensor guiding the Patriot missile and is expanding its production capacity to meet this growing demand.
In legal developments, Boeing may potentially avoid criminal charges over its 737 MAX settlement, as the U.S. Justice Department deliberates on a deferred prosecution agreement. This comes in the wake of Boeing's breach of a 2011 settlement tied to two fatal 737 MAX crashes.
On the analyst front, Deutsche Bank has maintained its Buy rating on Boeing shares, citing an increase in 737 MAX deliveries. However, the bank expressed caution regarding the company's widebody segment, especially the 737 models, due to reported quality issues.
Boeing has also announced a temporary reallocation of some of its engineering staff from the X-66A experimental aircraft project to its commercial airplane programs, in an effort to boost production and delivery of its existing jet models.
InvestingPro Insights
Boeing's (NYSE:BA) recent moves have been closely watched by the market, and real-time data from InvestingPro paints a detailed picture of the company's financial health. With a market capitalization of $109.95 billion, Boeing is a significant player in the Aerospace & Defense industry. Despite an 8.37% revenue growth over the last twelve months as of Q1 2024, the company's gross profit margin stands at a modest 11.48%, reflecting some of the challenges it faces in maintaining profitability. Moreover, Boeing's stock has experienced notable volatility, with a steep 31.23% drop in the six-month price total return as of the same period.
InvestingPro Tips suggest caution due to several analysts revising their earnings downwards for the upcoming period and the lack of dividend payments to shareholders. Additionally, the company's stock price is currently trading at a high EBITDA valuation multiple, indicating that it may be priced optimistically relative to its earnings before interest, taxes, depreciation, and amortization. For readers interested in a deeper analysis of Boeing's financials and stock performance, InvestingPro offers more tips and insights. By using the coupon code PRONEWS24, you can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips available for Boeing, which can provide further guidance for investors considering this aerospace giant.
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