BoeingKLX Combination Not A Perfect Fit, Canaccord Says.jpg Boeing
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Boeing/KLX Combination Not A Perfect Fit, Canaccord Says

Former B/E Aerospace division's popularity with customers could sway OEM, however.

Boeing's aftermarket push is bound to include growth through acquisition, but fasteners and consumables specialist KLX is not the ideal candidate, Canaccord Genuity analyst Ken Herbert suggests.

KLX, spun out of B/E Aerospace in 2014, announced Dec. 22 it was "reviewing strategic alternatives to maximize shareholder value" — Wall Street-speak for evaluating sales or spin-off options. Canaccord sees distribution as "a natural and very complimentary way for [Boeing Global Services (BGS)] to grow," suggesting a tie-up could be perfect.

But Boeing may need more top-line gain from a BGS-focused purchase. 

KLX generates about $1.5 billion annually, but only about 35% of this is aftermarket revenue, Canaccord notes. The rest—aerospace OEM and energy sector—could make the company a less-attractive BGS acquisition target than a more aftermarket-focused business, Canaccord suggests.

"[Boeing] has an industry-leading platform in Aviall, the distribution segment allows the company to maintain a strong presence in the engine market, and as long as [Boeing] can maintain its platform agnostic approach to the market that Aviall has so far been very successful with…we believe it represents a strong platform for additional growth," Herbert writes in a research note.

While KLX might not add much to BGS's revenues, its reputation—at least according to an informal Canaccord survey—is second to none. Querying 14 airlines, Canaccord found that KLX topped a list of some 20 distributors in terms of customer satisfaction, with Aviall coming in second.

"The strength of KLX could be a reason for Boeing to look further at this business," Herbert acknowledges.

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