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Spirit AeroSystems Holdings, Inc. Message Board

  • citiccgirl citiccgirl May 3, 2013 1:01 PM Flag

    Value Leaders: Spirit AeroSystems (SPR) an attractive risk/reward turnaround candidate

    Value Leaders: Spirit AeroSystems (SPR) an attractive risk/reward turnaround candidate

    Spirit AeroSystems (SPR) is probably not the most exciting stock in the market, but when you're a value investor, excitement does not rank high on the list of important attributes. What SPR does have is an attractive turnaround story. This supplier of aerostructures to Boeing and Airbus has been having a number of production problems as it has had difficulty juggling the production of its core/mature (B737, B777, A320) programs with its more developmental (B787, A350 XWB) programs.

    But that's why we think the risk/reward looks good here. You don't want to buy these cyclical stocks when everything is going great. You want to buy them when they are having some difficulties and ride them back up. We think SPR has the potential to do that. They recently brought in a new CEO from outside the company to provide a fresh perspective and the last couple of earnings reports shows that the worst of the problems seems to be behind them.

    What They Do
    Spirit AeroSystems is one of the world's largest non-OEM manufacturers of aerostructures for commercial aircraft in the world. In fact, it is the largest supplier of aerostructures to Boeing and one of the largest to Airbus. Aerostructures are structural components such as fuselages, propulsion systems and wing systems for commercial and military aircraft. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul (MRO), and fleet support services.
    Spirit AeroSystems was formed in 2005 when Boeing spun off its commercial aircraft operations. SPR makes aerostructures for every Boeing commercial aircraft currently in production, including the majority of the airframe content for the Boeing B737, the most popular major commercial aircraft in history. The B737 alone represented 47% of SPR's total revenue in 2012. SPR also won a contract that makes it the largest aerostructure

    Sentiment: Strong Buy

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    • What They Do
      Spirit AeroSystems is one of the world's largest non-OEM manufacturers of aerostructures for commercial aircraft in the world. In fact, it is the largest supplier of aerostructures to Boeing and one of the largest to Airbus. Aerostructures are structural components such as fuselages, propulsion systems and wing systems for commercial and military aircraft. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul (MRO), and fleet support services.

      Spirit AeroSystems was formed in 2005 when Boeing spun off its commercial aircraft operations. SPR makes aerostructures for every Boeing commercial aircraft currently in production, including the majority of the airframe content for the Boeing B737, the most popular major commercial aircraft in history. The B737 alone represented 47% of SPR's total revenue in 2012. SPR also won a contract that makes it the largest aerostructures content supplier on the Boeing B787, Boeing's next generation twin aisle aircraft.

      In addition, SPR is one of the largest content suppliers of wing systems for the Airbus A320 family and it's a significant supplier for the Airbus A380. Looking ahead, SPR will be a significant supplier for the new Airbus A350 XWB (Xtra Wide-Body) after the development stage of the program.

      SPR derives revenue primarily through long-term supply agreements with Boeing (84% of revenue) and Airbus (9%). Other smaller customers include Sikorsky, Rolls-Royce, Gulfstream, Israel Aerospace Industries, Bombardier etc. Of note, SPR is the sole-source supplier of 97% of the products its sells to Boeing and Airbus.

      Sentiment: Strong Buy

      • 1 Reply to citiccgirl
      • Dreamliner B787 Program is Important to the SPR Story

        While the B737 program still represents the largest percentage of revenue for SPR at 47%, the B787 Dreamliner program is viewed by investors as very important to the future of SPR. As we mentioned earlier, SPR is the largest aerostructures content supplier on the Boeing B787.

        The B787 has the potential to revolutionize air travel in the US and internationally. Its main benefit is that much of the aircraft (35 short tons) is made of carbon fiber composites rather than metal as most aircraft models rely on today. Carbon fiber composites have a higher strength-to-weight ratio than traditional aircraft materials. This helps to make the 787 a lighter aircraft, saving about 25% of the fuel cost.

        Following several delays, Boeing began commercial deliveries of the B787 in November 2011. However, on January 16, 2013, following two incidents of lithium ion battery failures, the FAA issued an emergency airworthiness directive to address this problem. Airlines had to temporarily cease operations which caused Boeing to suspend deliveries. The good news is that the FAA has since lifted the grounding order for the 787.

        Sentiment: Strong Buy

 
SPR
37.96+0.01(+0.03%)Aug 27 4:01 PMEDT

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