Suffering in Aerospace, Bombardier's Train Division Set to Leave the Tracks

The uncertainty in the aerospace market appears to be disproportionately weighing down shares in Bombardier Inc. (BDRAF.PK) and could provide a lucrative opportunity for investors, according to Chris Murray, CIBC World Markets analyst.

While the manufacturer’s aerospace backlog is certainly more exposed in the current economic environment to deferrals or cancellations, its train division is set to take off, Mr. Murray said in a note to clients.

Governments around the world have announced up to C$30-trillion worth of infrastructure spending over the next two decades as part of their economic stimulus packages, with roughly 40% of that allocated for transportation projects. Bombardier Transportation, as an industry leader in the rail business, stands to make some significant gains from this spending, Mr. Murray said. Given these factors, he estimates the fair value for Bombardier’s share price is C$6.33, implying upside of roughly 40%.

Mr. Murray said:

We believe current share prices are overly depressed and do not reflect fair value. We continue to believe that Bombardier shares represent an attractive investment at current levels.

He maintained his C$9 a share price target and his “outperformer” rating on the stock.