UPDATE: Bank of America Downgrades Spirit AeroSystems, Raises PO

In a report published Tuesday, Bank of America Merrill Lynch analyst Ronald Epstein downgraded Spirit AeroSystems SPR to Neutral from Buy, raising its price objective from $32.00 to $36.00. According to the report, in 2013 SPR shares appreciated 100.8 percent. The strong stock price performance reflected the company's decision to review its development programs which have weighed down earnings. At current levels, limited upside potential is seen to the stock. “In our view, the company's decision to divest its Oklahoma facilities (Tulsa and McAlester) has been positive for the company as it lowers future operating risk for the company,” the report said. “We note that SPR develops and manufactures the integrated wings for the G650 and G280 in Tulsa. Without these facilities, SPR would have more flexibility to reallocate engineering and management resources to improve core programs as well as larger development programs like the A350. However, until SPR is able to divest the Oklahoma facilities, the company still carries the contractual pricing risks related to the G650 and G280.” The report further asserted that the price objective rise is based on 12.5x one-year forward multiple on 2015E earnings. It was also noted that 12.5x is on the lower end of the A&D peer range as analysts factor in the operational hiccups SPR has historically faced and its current status is a “show-me” story. SPR closed Monday at $34.06.