Why Spirit AeroSystems' stock is falling on the 737 Max 9 news

By Tomi Kilgore

Truist's Michael Ciarmoli estimates the Max accounts for more than 40% of Spirit AeroSystems' revenue this year

Shares of Spirit AeroSystems Holdings Inc. took a dive Monday as investors took the aircraft-components maker to task for its part in the grounding of Boeing Co.'s 737 Max 9 planes.

The grounding also hurt the shares of a number of other commercial aerospace suppliers with exposures to the 737 Max 9.

"We expect the bulk of the attention will focus on Spirit AeroSystems, which has been plagued by quality escape issues over the past 12 months and is the Max supplier to Boeing," Truist analyst Michael Ciarmoli wrote in a note to clients.

Spirit AeroSystems' stock (SPR) sank 8.1% in morning trading, to put it on track for the biggest one-day drop since it tumbled 12.7% on Aug. 24, 2023. That August selloff was a result of another quality issue involving parts for the Boeing 737 Max plane.

Meanwhile, Boeing Co.'s stock (BA) fell 6.8%, while the Dow Jones Industrial Average DJIA fell 85 points, or 0.2%, and the S&P 500 index SPX gained 0.5%.

Also read: Here's why the Dow's drop is mostly Boeing's fault

In Spirit AeroSystems' audited third-quarter filing, the company said Boeing accounted for revenue of $883.9 million in the quarter to Sept. 28, or 61.4% of total revenue of $1.44 billion.

While the issue that led to the 737 Max 9 grounding isn't currently expected to derail production of the aircraft, Ciarmoli noted that the Federal Aviation Administration's investigation is "still in the early stages," and the root causes and the extent of the costs associated with the issue are still unknown.

What he does know, he said, is that Spirit AeroSystems is the most exposed, and its stock should be under the most pressure.

Assuming production of 504 Max aircraft in 2024 for the companies he has data for, Ciarmoli estimates the Max will account for approximately 41% of Spirit AeroSystems' revenue this year.

Here is a list of other companies that will be hurt by the Max's grounding, along with Ciarmoli's estimates of the companies' revenue exposure:

Astronics Corp.: about 12.4% of 2024 revenue; the stock ATRO slipped 0.5%.Triumph Group Inc.: approximately 11.5% of 2024 revenue; the stock TGI dropped 1.8%.Howmet Aerospace Inc.: about 10.3% of 2024 revenue; the stock HWM shed 0.9%.Ducommun Inc.: about 10.7% of 2024 revenue; the stock DCO sank 4.3%.Hexcel Corp.: the stock HXL slid 1.4%, as exposure is about 8.6% of the company's 2024 revenue.Albany International Corp.: about 8.6% of 2024 revenue; the stock AIN eased 0.3%.Woodward Inc.: about 5.5% of 2024 revenue,; the stock WWD slipped 0.7%.RBC Bearings Inc.: the stock RBC lost 0.6%, as the exposure is approximately 4.65% of 2024 revenue.Barnes Group Inc.: about 3.2% of revenue; the stock B inched up 0.3%.Curtiss-Wright Corp.: about 1.3% of 2024 revenue; the stock CW was down 1.6%.Moog Inc.: exposure was approximately 0.7% of 2024 revenue, and the stock MOG.A took a 0.4% hit.

Among the companies that could benefit, Benchmark's Josh Sullivan said he believes FTAI Aviation Ltd. (FTAI), which provides aircraft-leasing services, could get a boost, at least in the near term, as airlines look to lease narrow-body aircraft to replace the grounded 737s.

FTAI's stock climbed 2.2% in morning trading.

-Tomi Kilgore

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01-08-24 1200ET

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