Pick Boeing Stock Over Spirit AeroSystems For Better Gains

by Trefis Team
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The shares of Spirit AeroSystems (NYSE: SPR) have trended downward since March largely due to low production at Boeing and a slump in travel demand. The company designs and manufactures commercial aerostructures such as fuselage systems, propulsion systems, and wing systems, and supplies to aircraft manufacturers including Boeing (NYSE:BA) and Airbus. While the $34 billion order backlog strengthens long-term shareholder returns, the stock is unlikely to provide quick gains as 737 MAX production is expected to resume next year. Moreover, the company incurred $745 million of operating cash outflow last year due to high fixed costs and tepid production numbers. Given the $3 billion contraction in SPR’s market capitalization from pre-Covid levels and high operational costs, Trefis believes that the stock will continue to face downward pressure in the near term. We compare the historical stock price trends between Spirit AeroSystems and Boeing in an interactive dashboard analysis, SPR Stock Has 54% Chance Of A Rise Over The Next Month After Declining 5.3% In The Last 5 Days.

After observing a strong pullback, airline stocks are trending lower due to demand uncertainty

The shares of Southwest Airlines and American Airlines have observed a strong pullback earlier this year as indicated by the 34% and 42% YTD growth, respectively. However, airline stocks have been observing a correction in the past ten days subsequently leading to a contraction in Boeing and Spirit AeroSystems’ stock. Per Boeing’s commercial market outlook, global passenger traffic and aircraft fleet are expected to grow annually by 4% and 3.2% in the next twenty years, respectively. As 737 Max’s production is expected to resume next year, Spirit AeroSystems is likely to observe high fixed costs due to delayed demand. Notably, the 737 Max program accounts for 54% of Spirit AeroSystems’ order backlog.

Spirit AeroSystems’ debt is due to operational losses but Boeing’s debt is not

Spirit AeroSystems and Boeing’s stock have observed a 5.5% and 2.5% contraction in the past ten days – indicating a negative sentiment surrounding both stocks. In 2020, Spirit AeroSystems observed $745 million of operating cash outflow and a similar surge in long-term debt obligations. However, Boeing’s soaring debt is primarily from piled-up inventories which are expected to ease with rising air travel demand. Therefore, Spirit AeroSystems’ stock is likely to observe a slower recovery than Boeing.

Are defense stocks also better picks over Spirit AeroSystems? See Spirit AeroSystems Peer Comparisons on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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