Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Spirit AeroSystems Are Up Today

By Lou Whiteman - Apr 8, 2020 at 1:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is proactively dealing with Boeing's production shutdown.

What happened

Shares of Spirit AeroSystems (SPR 3.52%) climbed more than 10% on Wednesday after the aerospace supplier announced a series of moves designed to help it weather the impact of the COVID-19 coronavirus pandemic. The one-time Boeing (BA 2.28%) subsidiary said it was suspending production on Boeing programs and cutting costs the best it can.

So what

Spirit AeroSystems has long tried to get out from under Boeing's shadow, but the company still relies on its former parent for more than two-thirds of revenue. With airlines grounding their fleets and cutting costs, Boeing has responded by halting production of new aircraft. That, in turn, is trickling down to suppliers like Spirit.

An aerospace assembly line.

Image source: Getty Images.

In a statement Wednesday, Spirit said it was halting production of most Boeing products and furloughing about 3,200 employees that work on those lines for 21 calendar days. The company said that defense work, as well as Airbus commercial work, would continue.

The shutdown is not good news, but investors knew it was coming. And Spirit AeroSystems was pretty upbeat in its statement about its cash position. The company said as of April 2 it has $1.83 billion in cash and $3.04 billion in debt on its balance sheet: "Spirit believes that it is well positioned to manage its liquidity through this challenging and unprecedented situation."

The company also said that if airplane production rates fall further, it would evaluate further cost reductions, "including additional workforce actions," as needed.

Now what

Spirit AeroSystems is doing what it can and should be commended. But make no mistake: This is a tough time to be a commercial aerospace supplier, and the ramifications from COVID-19 will be severe and long-lasting.

I believe the company is correct and is well-positioned to survive. But even so, this is a challenging time to be buying into the commercial aerospace supply chain. I'd recommend investors remain on the sidelines.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Spirit AeroSystems Holdings, Inc. Stock Quote
Spirit AeroSystems Holdings, Inc.
$30.33 (3.52%) $1.03
The Boeing Company Stock Quote
The Boeing Company
$139.84 (2.28%) $3.12
Airbus Stock Quote
$25.16 (3.58%) $0.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.