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Spirit AeroSystems Holdings' (NYSE:SPR) shares were trading around $25 at the time of this writing. This is near the higher end of their 52 week range of $14 and $26. According to its 2011 annual report revenues for 2011 grew 17% compared to 2010. Guidance for 2012 is for revenue growth of around 10%. Spirit's revenues are 85% tied to Boeing orders; Spirit is the largest independent supplier of aero structures to Boeing (NYSE:BA).

Spirit competes with companies such as Triumph Group (NYSE:TGI) and BE Aerospace (NASDAQ:BEAV). All of these companies supply large amounts of parts to Boeing, Airbus, and other airplane makers. These are the companies responsible for all the structural systems from the rails that the seats slide into to the modular bathrooms and areas for the storage of service carts. Spirit is in the middle of the three in terms of market cap at $3.6 billion while BE Aerospace leads at $4.8 billion and Triumph comes in at $3.11 billion. They are equal players that supply specific parts for multiple airframes.

BE Aerospace was just awarded an exclusive contract to manufacture the modular lavatory systems for Boeing's 737 next-generation aircraft. According to a diagram of the 737 on Spirit's website it appears that it is responsible for a substantial percentage of the aircraft. With Boeing's 737 MAX in the pipe it would stand to reason that Spirit will have a similar responsibility for that and will be seeing growth with that for the foreseeable future. In a recent release, BE Aerospace's contract for the bathrooms on the 737 is estimated at over $800 million. If BE Aerospace's contract is that high for just the bathrooms, the contract for all of Spirit's contributions to the 737 MAX has to be much larger. That coupled with the large backlog of orders for the new 737 means that as long as Spirit can stay in Boeing's good graces, it is poised for sustainability over the long term.

Each of these companies is pretty focused in regards to the products and systems that they provide to their respective customers. They currently have their specialties and are sticking to those. If any of them wanted to grow, it would have to being offering products or services in a niche held by another company. For instance, if Spirit wanted to try and steal business away from BE Aerospace, it could for the modular bathroom contract. This would take some time and money to develop the new capability, but once developed; it would allow the company to provide a more total solution and possibly better pricing to its customer. At this point each of these three companies could be equally as dangerous to each other as the next.

Triumph group might be trying to do just that. Last year it acquired Vought Aircraft Industries. Vought was a producer of fuselages, wings, tail assemblies, and the like. This is right in line with everything that Spirit is contracted for on the 737 MAX. Triumph's revenues went from $1.3 billion in 2010 to just shy of $3 billion at the end of 2011, and that wasn't with a full year of Vought's revenues. Triumph added those capabilities to its already existing ones to do what I just mentioned above, increase offerings to become a total solution. While it's not yet a total solution, it is certainly working on it with that acquisition. Spirit needs to work to make sure it doesn't lose any customers to Triumph as it expands. In addition, to stay competitive, Spirit should look to add those new capabilities either by organic expansion or acquisition. Unfortunately for Spirit it only has $178 million in cash and $1.2 billion in debt on its books. This would make any large capital expenditures or acquisitions by debt quite difficult. It could potentially do a stock deal, but the new company couldn't have much debt. Additionally, Spirit would have to convince the shareholders of the company that it is trying to acquire that an all-stock deal will be work it to them.

Ties to the defense industry for Spirit are minimal. None of the direct listed programs on its website denote a military airframe, however in the annual report it talks about several military platforms it supplies. It also makes mention that is uses existing production lines to build some of the military platforms helping to reduce overhead costs. While it supplies companies that do a substantial amount of military business, I don't think Spirit will feel any adverse effects of reduced defense spending.

Spirit's key is maintaining its relationship with Boeing. If it does that the company is poised for good growth as Boeing continues to contracts for new orders continue to increase. As long as it can keep developing parts that will contribute to quality and efficiency of airplanes, it should see more business as other plane makers strive for new and efficient aircraft. Spirit needs to focus on finding other customers so that its fate isn't so directly tied to Boeing's. In addition, it needs to keep its customer satisfaction high to prevent other companies from coming in and taking away Spirit's business.

I do like Spirit here and I think we missed the most recent pullback that happened on March 6th. You could chance waiting for another one, or at least wait for a down day in the market, but I don't think we'll see it back near $23 for a long time. As long as Boeing's orders continue to increase and Spirit keeps taking advantages of increasing margins, I think we'll see shares to $30 by end of 2012 and $35 by end of 2013.

Source: Spirit AeroSystems As A Play On Boeing's Innovation