Hot Stock: Bombardier

Revenues expected to rise.

 

It’s been nearly two years since Bombardier’s (TSX: BBD.B) stock began to tumble. On June 30, 2011 the Montreal-based aerospace and transportation company was trading at nearly $7. Three months later it was selling for $3.67 and, while it’s moved up somewhat, it’s still well below its previous highs.

The fall was brought on by some lost contracts, big layoffs, worries about a Chinese slowdown and drop in private jet travel; it was uncertain times to be sure, but with the economy in recovery mode today, many think the stock price is poised for a rebound.

In a June 17 note, National Bank Financial analyst Cameron Doerkson pointed out that the company has recently signed several new deals, which is good news for investors. One big one was is its “definitive agreement” with COMAC, a Chinese aerospace company, to collaborate on new aircraft development programs.

It also announced that VistaJet, one of the company’s most important business jet customers, ordered 20 Challenger 350 mid-sized business jets. An undisclosed buyer purchased 12 Global 8000 business jets too.

Doerkson writes that Bombardier’s executives think more orders will come soon. “Management indicates that its business jet order pipeline remains strong and that the high end of the market is still solid,” he says.

One product that’s crucial to its future success is the company’s new CSeries jet. So far, the company has received 177 orders, but it’s hoping to get 300 by next year. Reportedly, sales have been slow during this week’s International Paris Air Show, but Benoit Poirer, an analyst with Dejardins Capital Markets, is bullish on the aircraft’s prospects.

He spoke to people from AirInsight, an aerospace consulting firm who think the CSeries “will ultimately be a success as it is the best performer in its class.” The consulting firm reports that the aircraft is quieter and more environmentally friendly than others in the category and that it’s highly likely it will reach its sales goal.

As CSeries sales pick up and other jets, like its Q400 aircraft get more traction, revenues and earnings per share will rise. Poirer estimates that 2014 revenue will hit about $20.5 billion, up from $18.6 billion this year, while EPS will jump from an expected $0.37 in 2013 to $0.5 the year after.

The analyst has a buy rating on the stock and thinks it’s a great long-term purchase. “We continue to believe that Bombardier is attractive at current levels and represents a good long‐term buying opportunity,” he says.

Doerkson also has an outperform rating on the stock. He thinks the stock price, which is about $4.50 today, could reach $5.25 over the next 12 months, while Poirer predicts it will climb to $6. A William Blair & Company analyst is even more optimistic, saying the stock price will hit $7.

Here’s another reason to buy: its yield is a solid 2.24%.

For more investing insights, follow Bryan on Twitter @bborzyko

 

 

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