Spirit AeroSystems Holdings, Inc. (SPR - Free Report) recently unveiled plans to invest $1 billion at its headquarter — Wichita, KS facility over the next five years. The latest move will help the company to expand the facility and create additional 1,000 jobs.
Following the news, Spirit AeroSystems’ shares gained 1.7% on Dec 6 highlighting investors’ optimism on the stock.
Details of the Plan
To execute the plan, Spirit AeroSystems has collaborated with the city, county and state departments for hiring the workforce. This in turn is likely to bolster Wichita’s position as the Air Capital of the World.
The company has signed a memorandum of understanding (MOU) with the city and Sedgwick County under which they will jointly invest for constructing a building to the north of Spirit AerosSystems. However, the project’s completion is subject to necessary approvals of the the Wichita City Council and the Sedgwick County Commission, and the execution of definitive agreements between the parties.
The employees, including skilled sheet metal mechanics, composite technicians and CNC machine operators will be recruited on an hourly basis.
Why was the Plan Chalked Out?
Factors like increasing production rates on existing commercial aircraft programs, growth in the company’s Fabrication and Defense businesses and other new business pursuits were the key catalysts that spurred Spirit AeroSystems management to chalk out the five-year growth plan.
Notably, Spirit AeroSystems, a leading supplier of commercial airplane assemblies and components, primarily manufactures commercial aerostructures for the aerospace major The Boeing Company (BA - Free Report) at its Wichita facility. Being the largest independent supplier of aerostructures to Boeing, which raised the 20-year forecast for jetliner demand by 3.6% this June, it is expected that higher demand for commercial planes will play a vital role in Spirit AeroSystems designing its latest plan.
Apart from producing aerostructures for commercial jets, Spirit AeroSystems also designs and manufactures structural components for military aircraft. In this line, with the current U.S. administration highly in favor of solid spending on defense contractors, as is evident from the recently passed fiscal 2018 defense bill worth $700 billion, the company’s growth prospect in defense space has also enhanced. We believe factoring in all these attributes Spirit AeroSystems unveiled the growth plan.
How Will the Plan Benefit?
The state of Kansas has played a pivotal role in the global aviation industry and surely Spirit AeroSystems' $1-billion investment, one of the largest economic development projects in Kansas history, will boost career opportunities for Kansans citizens. Apart from creating jobs creation, the expansion plan will also augment the economic growth of the state.
The five-year plan will also expand Spirit AeroSystems’ footprint in Wichita and Kansas. Notably, the company is a leading supplier of aerostructures for renowned aircraft manufacturers — Boeing and Airbus Group (EADSY - Free Report) .
Per its current market outlook, released by Boeing, the world will need 41,030 new planes, worth $6.1 trillion, between 2017 and 2036. About 21% of the total commercial demand is likely to come from North America. Considering this, the latest expansion plan made by Spirit AeroSystems seems to be a profitable decision as with increasing demand for commercial jets, demand for the company’s aerostructure will get a solid boost.
Spirit AeroSystems’ stock has returned 36.6% over a year, outperforming the 31.2% rally of the industry it belongs to. This may have been driven by the escalating demand for commercial jets which in turn drove the company’s demand for aerostructers.
Zacks Rank & Key Pick
Spirit AeroSystems currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the same space is Curtiss-Wright Corporation (CW - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Curtiss-Wright posted a positive average earnings surprise of 11.78%. It has a long-term earnings growth rate of 12.40%.
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