Boeing (NYSE:BA) is on the brink of finalizing a deal to acquire Spirit AeroSystems (NYSE:SPR), Reuters reported. Spirit AeroSystems is a former subsidiary of Boeing and a supplier of its key parts. It manufactures aerostructures for commercial and military aircraft.
Investors reacted positively to the news, pushing SPR stock up by 4.2% in after-hours trading on Thursday.
The Rationale Behind the Deal
Boeing, which manufactures commercial airplanes, has been eyeing Spirit AeroSystems for a while. The rationale behind acquiring Spirit is to ensure stability and improve its manufacturing supply chain.
Boeing is also concerned about Spirit’s financial stability and its ability to invest in new technology. This concern stems from the potential impact on Boeing’s supply chain for its top aircraft models, which could be disrupted if Spirit encounters financial constraints.
It’s worth noting that Spirit’s high dependency on Boeing is weighing on its financials. Boeing accounted for about 64% of Spirit’s total revenue in 2023. However, Boeing has been facing challenges after an incident on an Alaska Airlines (NYSE:ALK) flight in January. Consequently, Boeing’s quality and safety concerns weighed on its production and deliveries, impacting Spirit’s performance.
Boeing’s Acquisition Hurdles with Spirit
Notably, Boeing has been facing challenges in acquiring Spirit, given the latter’s involvement in producing parts for Boeing’s main rival, Airbus (EADSY). Further, Airbus has threatened to block any deal that would let Boeing produce parts for Airbus’ new models.
However, Reuters reported that Boeing and Airbus have made progress in resolving their issues. Per the report, Boeing will reclaim certain projects, while Airbus will retain others, and certain projects may be sold or managed independently. Further, Airbus and Boeing are working on resolving issues related to inventory costs and contract values.
Is Boeing Stock a Buy or Hold?
Boeing stock is down over 32% year-to-date, reflecting quality issues and a production slowdown. Meanwhile, analysts are cautiously optimistic about its prospects. BA stock has 17 Buys, seven Holds, and two Sell recommendations for a Moderate Buy consensus rating.
Analysts’ average BA stock price target of $213.70 implies 21.21% upside potential from current levels.
