(Adds analyst comment)
By Ankit Ajmera
May 3 Aircraft parts maker Spirit AeroSystems
Holdings Inc's shares slumped on Wednesday after the
company said it was taking "longer than expected" to agree on
prices with its biggest customer, Boeing Co, which
analysts said may create uncertainty over its cash flow growth.
Analysts said Spirit Aero's tone regarding the negotiations
with Boeing were a deviation from its prior remarks, which had
indicated that talks were progressing constructively.
Shares of Wichita, Kansas-based Spirit Aero fell as much as
9 percent to $53.06.
Boeing and European rival Airbus SE have been
pressing suppliers to cut prices on aircraft parts, as they seek
to stay competitive amid burgeoning demand from airlines for
more capable planes at lower prices.
Spirit Aero's talks with Boeing relate to prices for parts
including sections of fuselages, aerodynamic components
surrounding engines and wing framework for the planemaker's
best-selling narrow-body 737 aircraft and the wide-body 787-9
and -10 Dreamliners.
"There's still a gap between us really on the 737 side as
well as the 787 side. We're working very hard to close those,"
Spirit Aero Chief Executive Thomas Gentile said on a
post-earnings call with analysts.
The company, which gets more than 80 percent of its revenue
from Boeing, has since last year sold aircraft parts to the
planemaker on an interim supply pact, after a previous 10-year
agreement expired in 2015.
"It's an overhang until this is settled. You don't know how
much cash (Spirit Aero is) going to get, and whether they have
to give money back to Boeing ... it clearly clouds the
visibility somewhat," Cowen & Co analyst Cai Von Rumohr said.
Last year, Spirit Aero signed a fresh supply deal with
Airbus SE for the wide-body A350 XWB aircraft, a
competitor to Boeing's 787. However, Spirit Aero took a non-cash
charge of $135.7 million related to that contract.
Gentile said he was satisfied with the current interim
pricing agreement with Boeing, but also added "it would be
better to get to a final commercial settlement and remove some
of the uncertainty that surrounded it."
While Spirit Aero on Wednesday backed its financial
forecasts for the year, some analysts also raised concerns about
the company's growth prospects.
"We see risk to future periods if negotiations break down or
if Boeing is able to exert leverage over (Spirit Aero) as it has
done with other suppliers," SunTrust Robinson Humphrey analyst
Michael Ciarmoli said in a client note.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Shounak
Dasgupta and Sai Sachin Ravikumar)