Boeing (NYSE:BA) is persisting in its global fleet expansion despite supply chain disruptions and specific issues with its 737 model. The company has faced several complications including design non-compliance and thousands of misdrilled holes in the 737 MAX 8 aft pressure bulkhead by Spirit AeroSystems (NYSE:SPR), which are critical for maintaining cabin pressure. These issues have disrupted both new production and routine maintenance component replacements across the airline industry. However, Boeing managed to deliver 344 planes during the initial eight months of this year and is aiming to overcome these obstacles to deliver over 400 units of the 737 MAX by the end of 2023.
Randy Heisey, Boeing's regional Managing Director, highlighted the need for supply bases to rebuild their capacity to meet production targets. The company remains confident that a solution is imminent.
In related news, Spirit AeroSystems' stock rose by 23% following an agreement with Boeing to improve product quality and delivery, including for Boeing 737 fuselages and Boeing 787 production. The deal involves a $100 million payment from Boeing and is expected to bring Spirit $455 million in incremental revenue through 2025. However, it also projects a $265 million revenue decrease from 2026 to 2033.
The agreement might influence Airbus, another Spirit client and Boeing competitor, to pursue a similar deal. While Spirit has seen diversified growth across commercial, defense, and aftermarket segments, its profitability has been impacted by union work stoppages and excess capacity costs.
Spirit's profitability now hinges on improving operations and relationships with Boeing and Airbus, maintaining revenue growth while cutting costs, and managing its substantial $3.9 billion debt balance. Leadership transitions are ongoing with Patrick Shanahan stepping in as Interim President & CEO after Thomas Gentile.
Analysts predict a 17% year-over-year revenue increase for Spirit and a Q3 net loss of $1.35 per share, but foresee a positive shift in EPS to $0.60 per share next year. Wall Street's reaction to the Spirit-Boeing deal has varied; TD Cowen voiced concerns about the 2026 cash flow reversal and execution risks, while Deutsche Bank (ETR:DBKGn) upgraded Spirit to a buy status with a $30.00 price target. J.P. Morgan remained bullish, emphasizing the CEO transition and future growth prospects.
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