Corporate bond research firm Gimme Credit raised its recommendation for Spirit AeroSystems (NYSE:SPR) to Underperform with limited downside in a note Tuesday.
The firm's analysts noted the company has been caught up in another supplier issue with Boeing, which is likely to result in near-term aircraft delivery delays.
However, "despite yet another near-term quality control issue," analysts said that SPR's $42 billion backlog at the end of the third quarter indicates longer-term demand remains robust.
"In October, SPR signed a memorandum with BA expected to improve cash flow over the next few years," the analysts wrote, adding that one of the key points is "higher pricing on the BA 787 program through 2026 leading to the fourth quarter reversal of $350-370 million of forward loss and material right obligations.
In addition, they pointed to the reversal of $23 million of expected claims related to the BA 737 vertical fan attach fitting issue, as well as the receipt of $100 million of funding for tooling and capital to be repaid starting in 2025 and the extension of the repayment dates on $180 million of customer advances received in the second quarter until December 2025.
"The 9.375% first lien notes due 2029 yield 6.9%. With a better liquidity position, the 2025 notes maturity addressed, and the possibility of a memorandum agreement with Airbus, we raise our recommendation to underperform with limited downside," concluded the analysts.