Company Reports

Narrow-moat-rated Bombardier had an influx of orders in the first quarter of 2024, ending the period with a robust $14.9 billion backlog. Although deliveries were less than stellar to start the year, Bombardier continues to see strong demand for its business jets. Revenue fell 12% year over year to $1.3 billion, primarily because of delivery mix shifting toward the medium-sized Challenger series and away from the large-cabin Global series. After adjusting slightly for delivery mix expectations through 2025, we raised our fair value estimate to CAD 92 from CAD 90.

In late 2017, Bombardier faced difficult choices as ballooning costs and delays of developing the narrow-body commercial jet that would become Airbus’ A220 overstretched its financial resources. Between 2018 and 2022, the erstwhile transportation conglomerate radically rationalized its portfolio, shedding more than half of revenue and assets in the sale or disposal of its two largest commercial aircraft lines to Airbus and Mitsubishi, its aerostructures shop to Spirit Aero Systems, and the ancestral Bombardier train manufacture to Alstom. What remains is a narrow-moat business focused on manufacturing and servicing the long-range Global and medium-to-large Challenger families of business jets.

In late 2017, Bombardier faced difficult choices as ballooning costs and delays of developing the narrow-body commercial jet that would become Airbus’ A220 overstretched its financial resources. Between 2018 and 2022, the erstwhile transportation conglomerate radically rationalized its portfolio, shedding more than half of revenue and assets in the sale or disposal of its two largest commercial aircraft lines to Airbus and Mitsubishi, its aerostructures shop to Spirit Aero Systems, and the ancestral Bombardier train manufacture to Alstom. What remains is a narrow-moat business focused on manufacturing and servicing the long-range Global and medium-to-large Challenger families of business jets.

Reports that Boeing is in talks to acquire Spirit AeroSystems make eminent sense to us. We are maintaining our $31 fair value estimate for Spirit until we learn more about the contours of a possible deal.

Narrow-moat Bombardier finished the year with strong fourth-quarter results but followed it up with disappointing guidance for 2024. Full-year revenue of $8 billion and adjusted EPS of $3.94 both surpassed consensus estimates and were above what we originally baked into our forecast. However, Bombardier noted that it is still experiencing supply chain issues in certain areas and issued 2024 free cash flow guidance well below what investors expected. Shares were trading down 13% by midday. Our long-term thesis has not materially changed, and, after adjusting for a shift in delivery mix and working capital cadence, we raised our fair value estimate to CAD 90 from CAD 82 per share.

In late 2017, Bombardier faced difficult choices as ballooning costs and delays of developing the narrow-body commercial jet that would become Airbus’ A220 overstretched its financial resources. Between 2018 and 2022, the erstwhile transportation conglomerate radically rationalized its portfolio, shedding more than half of revenue and assets in the sale or disposal of its two largest commercial aircraft lines to Airbus and Mitsubishi, its aerostructures shop to Spirit Aero Systems, and the ancestral Bombardier train manufacture to Alstom. What remains is a narrow-moat business focused on manufacturing and servicing the long-range Global and medium-to-large Challenger families of business jets.

We are picking up coverage of Bombardier with a narrow economic moat rating, and we see its shares as undervalued compared to our fair value estimate of CAD 82 per share. After a storied history as a prominent Canadian industrial conglomerate, Bombardier has emerged from several divestitures as a pure-play business jet manufacturer. The company currently focuses on manufacturing and servicing its Global (long-range) and Challenger (medium to large) aircraft families.

In late 2017, Bombardier faced difficult choices as ballooning costs and delays of developing the narrow-body commercial jet that would become Airbus’ A220 overstretched its financial resources. Between 2018 and 2022, the erstwhile transportation conglomerate radically rationalized its portfolio, shedding more than half of revenue and assets in the sale or disposal of its two largest commercial aircraft lines to Airbus and Mitsubishi, its aerostructures shop to Spirit Aero Systems, and the ancestral Bombardier train manufacture to Alstom. What remains is a narrow-moat business focused on manufacturing and servicing the long-range Global and medium-to-large Challenger families of business jets.

We are dropping analyst coverage of Bombardier. We provide broad coverage of more than 1,500 companies and adjust our coverage as necessary based on client demand and investor interest.

We are placing Bombardier under review as we transfer coverage to a new analyst.

Bombardier is a Canada-based industrial conglomerate with positions in aircraft manufacturing and rail transportation. It remains controlled by the Beaudoin family through a two-tier share structure. The firm operates three aerospace units--business aircraft, commercial aircraft, and aerostructures-- that account for just over 50% of revenues. In addition to its aerospace activities Bombardier is a global leader in rolling stock (trains), which represents the other half of the company's revenue base.

After disappointing the market in the third quarter with a cash flow guidance downgrade, no-moat Bombardier delivered a beat on cash flow to end 2018, landing at $182 million of free cash flow for the full year versus guidance of around break-even, including the sale of the company's Downsview facility. It's important to note that $155 million of cash flow came from prepayment of royalties associated with the divestment of business aircraft training. Still, the market liked what it saw, driving shares up about 23% on the news.

Bombardier is a Canada-based industrial conglomerate with positions in aircraft manufacturing and rail transportation. It remains controlled by the Beaudoin family through a two-tier share structure. The firm operates three aerospace units--business aircraft, commercial aircraft, and aerostructures--and a separate rail unit.

Bombardier’s stock has dropped nearly 50% over the past three months due to weak cash flows for 2018 and 2019. At its investor day, management sought to alleviate concerns by confirming its 2020 targets, and it showed normalized cash flow metrics in an attempt to demonstrate that it remains on track. For all the focus on transportation's working capital, we think most of the risk sits in the business aircraft now due to the Global 7500 ramp. And debt maturities in 2020 and 2021 mean management doesn't have much room for error. We continue to forecast management hitting most of its 2020 targets in our base case, but we did reduce cash flows slightly for Bombardier, which knocked 5 cents off our fair value, which now stands at CAD 4.

Bombardier is a Canada-based industrial conglomerate with positions in aircraft manufacturing and rail transportation. It remains controlled by the Beaudoin family through a two-tier share structure. The firm operates three aerospace units--business aircraft, commercial aircraft, and aerostructures--and a separate rail unit.

No-moat Bombardier hit some heavy turbulence as it navigates its ongoing turnaround, posting disappointing cash flow this quarter and providing a weak outlook. The company also announced plans to sell more assets and unveiled another round of restructuring that it thinks will drive $250 million of recurring savings by 2021. However, management didn't lift its 2020 margin target of 8%. We think these developments indicate that management has picked most of the low hanging fruit as it fixes the business and that it may face deeper operational issues in its transportation unit. We've decreased our free cash flow projections and trimmed our operating margins for 2020. Our new fair value estimate stands at CAD 4.05 down about 15% from our previous valuation. Despite the cut, shares look undervalued.

Bombardier is a Canada-based industrial conglomerate with positions in aircraft manufacturing and rail transportation. It remains controlled by the Beaudoin family through a two-tier share structure. The firm operates three aerospace units--business aircraft, commercial aircraft, and aerostructures--and a separate rail unit.

The turnaround continues at Canadian industrial conglomerate Bombardier, which reported second-quarter results featuring higher revenue, expanding margins, and improving cash flow. We think management is tracking to the deconsolidated C Series guidance it unveiled earlier this year, which calls for operating profit, or EBIT, before special items of about $950 million and break-even free cash flow. Based on this quarter's performance and management's initial outlook for 2019, we're planning to move up our CAD 4.40 fair value by around 8%.

Bombardier is a Canada-based industrial conglomerate with positions in aircraft manufacturing and rail transportation. It remains controlled by the Beaudoin family through a two-tier share structure. The firm operates three aerospace units--business aircraft, commercial aircraft, and aerostructures--and a separate rail unit.

We came away from Farnborough thinking that signs of life exist in regional jets, the Boeing 797 aircraft might not be launched after all, and demand is still very weak for large wide-bodies like the 777X and A350-1000. Per the Flight Global order tracker, aircraft manufacturers landed 1,464 orders and options (excluding conversions), which represents a 238 aircraft increase over the 2017 Paris Air Show. Additionally, a tentative deal between the Department of Defense and Lockheed Martin on the F-35 lot 11 contract was announced at the show.