Dow Jones Industrials name Boeing is back in the spotlight, engaged in advanced discussions to buy supplier Spirit AeroSystems. Boeing stock retreated after the report. Meanwhile, aerospace investors gave FTAI Aviation fresh attention after Jefferies initiated coverage with a buy rating.
Boeing
Boeing late Monday offered to buy components maker Spirit AeroSystems for about $35 per share, the Wall Street Journal reported. Discussions took a twist and the deal will be mostly in stock, according to the WSJ sources.
Current negotiations revolve around the Dow Jones leader paying more than $4 billion for the two-thirds of Spirit's business that supplies it with parts. As part of the deal, Spirit would shed operations that supply Boeing rival Airbus, which make up about one-fifth of Spirit's revenue. Terms of the deal are still underway.
The $35 price would represent a 6% premium to SPR stock's Monday close and a 22% premium to its Feb. 29 closing price, just before Boeing's takeover talks were reported publicly.
Deutsche Bank early Tuesday wrote that an equity-financed deal may be a better outcome for Boeing's stock than a cash offer, according to a research note reported by The Fly. The firm said it is "not overly troubled" by potential share dilution from the equity financing, particularly as the alternative would be longer-term debt. Deutsche Bank believes an equity offering would "pave the way" for shares to move higher due to reduced liquidity risk and lower probability of an investment grade downgrade. The firm maintained a buy rating on Boeing stock with a 225 price target.
Boeing stock carved 2.2% lower Tuesday following the news, trading near the bottom of the 30 Dow Jones industrials list. Shares have tumbled nearly 33% this year amid its quality control concerns and delivery woes.
SPR stock fell 3.9% Tuesday, but managed to hold above its 50-day line. Spirit AeroSystems stock is essentially flat in 2024.
FTAI Aviation Continues Soaring
Elsewhere, shares of steady climbing aerospace engine and parts supplier FTAI Aviation continue to surge as it gains attention from investors.
Jefferies on Tuesday wrote that FTAI's full suite of aftermarket service offerings should benefit from the delays from original equipment makers and pushout for jet retirements. FTAI should capture greater late-life shop visits, the firm wrote in a research note. FTAI's value proposition is a quicker, low-cost alternative for airline maintenance, Jefferies wrote. Meanwhile, FTAI provides maintenance, repair and exchange services for CFM56 and V2500 engines. The two models make up a combined fleet of more than 26,000 engines and power 55% of the global passenger fleet, according to Jefferies.
Jefferies expects FTAI's EBITDA to hit $1.1 billion in 2026, which is 10% ahead of analysts consensus estimate. FTAI recorded $597 million in EBITDA for 2023, which FactSet predicts will grow to $720 million in 2024.
Jefferies initiated coverage of FTAI stock with a buy rating and a 120 price target, representing about a 29% premium to Monday's closing price.
Mutual funds are taking notice too. The number of funds holding FTAI stock increased to 342 for the quarter ending in March 2024, compared to 254 funds for the quarter ending in June 2023.
FTAI Stock
FTAI rallied about 9% Tuesday to mark another record high.
Shares are on a tear this year, rocketing nearly 115% since the start of 2024.
FTAI climbed above its 50-day moving average in late October and has held firmly above that level through its advance.
FTAI stock has a near-perfect 97 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. FTAI has a 79 EPS Rating. The stock's relative strength rating is at 52-week highs and it has a perfect 99 RS Rating.
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