Spirit AeroSystems (NYSE: $SPR) is one of the world’s biggest producers of aerostructures for the aviation industry. It produces wing components, fuselages, pylons, and nacelles for commercial jets, defense platforms, and regional crafts.
In an internal memo on Thursday, May 16, 2024, Spirit AeroSystems announced it plans to lay off over 400 hourly employees amid a slowdown in production on Boeing 737 MAX aircraft.
Spirit AeroSystems Layoff Plans
According to a statement, the company had been forced to reduce its Wichita workforce after a slowdown in the delivery rate on commercial programs. The company plans to implement the layoffs in “as compassionate a manner as possible.”
Background on the Layoffs
Spirit AeroSystems has been working to boost 737 shipset production at a rate of 42 a month. The company staffed its production facilities to meet this rate at the start of the year. However, the door plug incident in January on an Alaska Airlines jet scuttled those plans. For many years, 42 has been identified as crucial to ensuring permanent positive cash flow.
Boeing is currently delivering 737s at a rate in the low 20s in 2024 thus far, and it is building inventory from suppliers. Most of the major suppliers are producing at a rate of 31 shipsets. However, they are girding for a potential cutback in orders while making supply chain changes to accommodate a slowdown.
At one point, Boeing stated it expected to achieve a delivery rate of 38 a month, which was supposed to be achieved in the summer of 2023.
Spirit AeroSystems Financial Results
In its Q1 results on May 7, 2024, the company reported that Boeing deliveries had declined by 31% from Q1 fiscal 2023, while overall deliveries had fallen 11.3%. The company reported a Q1 loss of $6216.7 million, continuing a quarterly loss pattern that began in 2019.
The company also revealed it was in talks to be bought out by Boeing, from which it spun out in 2005. Currently, the company get nearly 70% of its revenue from Boeing. However, it also makes parts for Boeing’s rival Airbus.
According to recent comments from Dave Calhoun, Boeing CEO, the two will likely reach a deal by the second quarter of fiscal 2024.
Spirit AeroSystems Stock Performance
On Thursday, the stock gained 1.57%, closing at $30.99 per share. The planned layoffs caused the stock to sink 1.242% to $30.55 in the Friday morning trading session as of 10:41 AM EDT.
The stock has remained relatively flat since the start of 2024, gaining 0.75%. Over the past 52 weeks, the stock has seen a notable surge of 24.96%, below the 27.37% gain of the SPX in the same period.
Short interest in the stock has declined by 11.444% over the past month to 9.06 million shares as of April 30, 2024. Those shares represent 7.84% of the floating shares and 7.78% of the shares outstanding.
SPR shares are trading below the critical metric of the 50 DMA of $33.16 and just above the 200 DMA of $26.68. Their 52-week range is a high of $36.34 and a low of $14.65.
Analysts Outlook on SPR Shares
According to 10 stock analysts, Spirit AeroSystems (SPR) shares have an overall moderate buy rating. They forecast a wide range for the stock, with a high of $40 and a low of $31. Their average price target of $35.33 is a 14% upside based on the most recent closing price.
Should You Add SPR Shares to Your Portfolio?
Spirit AeroSystems is currently facing headwinds amid issues at Boeing. However, Boeing’s planned buyout, expected to occur in 2024, could help boost the stock price. Typically, these deals often see the stock of the company being bought out rise. Additionally, while the airline industry has seen a slowdown in demand, it is likely a temporary issue, which means that in the long run, SPR stock could potentially be a great investment to hold.
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