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Wednesday, Jun 7, 2023

Boeing Acquisition: No Turbulence for Wesco

The chief executive of Wesco Aircraft Holdings Inc. is confident that the recent acquisition of a competing aerospace parts supplier by Boeing Co. will not have an impact on his business. Todd Renehan said in a conference call with analysts who follow the Valencia company that many of the original equipment manufacturers using parts that Wesco distributes through subcontractors compete against Boeing and will not want to do business with them. While not speaking for any of its customers, Renehan said many of the manufacturers would not be “thrilled” about the prospect of Boeing managing their hardware supply chain. “So, this could end up being positive for us, as the OEMs seek an independent source for their needs,” he added. KLX Inx., in Wellington, Fla., agreed this month to sell its aerospace solutions group to Boeing, in Chicago, in a transaction valued at $4.2 billion. The deal was brought up by two analysts on the May 3 conference call with Renehan and other Wesco executives after the company released its fiscal second quarter earnings. The aircraft parts supplier reported an adjusted net income of $22.2 million (22 cents a share) on revenue of $390 million for the quarter ending March 31. That compares to adjusted net income of $21.1 million (21 cents) in the same period a year earlier. In a research note released after the quarterly results, Michael Ciarmoli, an analyst with SunTrust Robinson Humphrey, said that fears about the Boeing acquisition of KLX appear to be overblown. Ciarmoli wrote in the note that Wesco’s share price went down 8 percent in the day or two following Boeing’s announcement, a sell-off “predicated on the assumption that (Wesco) would lose additional revenues to Boeing.” Wesco’s shares subsequently went up and closed May 23 at $11.25. Ciarmoli continued that based on what Renehan said in the conference call, the company’s management believes the impact of the acquisition will be immaterial because less than 10 percent of its revenue comes from Boeing. “Management also believes that the disruption in the marketplace along with the unwillingness of other tier one or two suppliers to further rely on Boeing for distribution/logistics needs will open up more opportunities for (Wesco),” Ciarmoli stated. “The same holds true for the aftermarket.” In the call, Renehan addressed the aftermarket by saying that airlines and the maintenance, repair and overhaul shops like having alternative part suppliers. He believed that puts KLX in a position where they have to give Boeing a priority in receiving parts over the repair and maintenance shops, Renehan said. “We believe that deals like this … can be disruptive and create opportunities in the marketplace,” he added. “So, we’re looking at this as (an) upside.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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