Shares in Boeing(NYSE: BA) supplier Spirit AeroSystems(NYSE: SPR) declined by 13.6% this week through Friday morning. The decline comes in a difficult week for both companies, as Boeing's customer Southwest Airlines told investors it plans to reduce capacity in light of delivery delays on Boeing planes. That raises questions over customers' willingness to order more Boeing planes, and that's not good for fuselage maker Spirit AeroSystems.
Federal Aviation Administration audit
In addition, an article in the New York Times claimed that Boeing failed 33 of 89 audits during a Federal Aviation Administration (FAA) examination, with Spirit failing seven of 13 audits.
The developments put further pressure on the two companies, and investors may have decided to bail on Spirit stock after buying into it following the news that Boeing was discussing "making Spirit AeroSystems a part of Boeing again."
Boeing sold off the company that would become Spirit AeroSystems almost 20 years ago in a bid to outsource elements of its business. However, severe financial pressures in recent years (Spirit hasn't generated any cash flow since the pandemic) mean that Boeing's key supplier (whose CEO, Patrick Shanahan, is a Boeing veteran) needed to restructure agreements and receive a cash injection from Boeing to ensure fuselage deliveries.
Image source: Getty Images.
Where next for Spirit AeroSystems?
Looking at matters rationally, it makes sense for retail investors to sell out of such situations. My argument is that retail investors are competing with other investors who may better understand the state of negotiations between Boeing and Spirit AeroSystems.
That said, if you think Spirit AeroSystems is fundamentally undervalued and likely to muddle through its quality control issues alongside Boeing, and there'll be no detrimental impact on Boeing orders after the negative publicity, then the stock will look like a good value.
Should you invest $1,000 in Spirit AeroSystems right now?
Before you buy stock in Spirit AeroSystems, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Spirit AeroSystems wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 11, 2024
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.
