On Bombardier, Analysts More Bullish than Bearish

The Street remains bullish on Bombardier Inc. (BDRAF.PK) ahead of the Montreal transportation giant’s year end results next Thursday.

Eleven of the 15 analysts covering the stock currently have a ‘buy’ rating on it, according to Bloomberg figures, despite significant challenges ahead for its aerospace division.

Fadi Chamoun, UBS analyst, said in a note to clients:

The expected downturn in business jets, and concerns over deteriorating liquidity in the coming two years have proved punitive to BBD’s valuation. With $3.6 billion of unrestricted cash on the balance sheet, and continued positive free cash flow from Transportation we believe that the company is well placed to weather the downturn in business jets.

Management has guided 336 aircraft deliveries this year, down from 349 last year, including a projected 10% decline in business jet deliveries.

But Mr. Chamoun, like many on the Street, expect further cuts to that forecast due to the rapidly declining environment for business jets purchases.

He said he expects 306 aircraft deliveries this year, which includes 186 business jets, implying a 22% decline year over year for the corporate jet division.

Nevertheless, he said he expects the company can earn C$.32 a share at the trough underpinned by strength in its Transportation division. He said he doesn’t expect the company’s cash reserves will fall below C$1.4-billion despite its mounting pension obligations, and noted its CSeries program has the potential to add about C$1 a share.

He has a “buy” rating on the stock and C$4.25 a share price target.

“We believe that there is upside to our target following a trough in the business jet market and ramp-up in orders for the CSeries, not yet reflected in our estimates,” he said.

Comments

[aviation guru]

You must be joking- the C-series is their attempt to take the low and below 737/320 market. Its still a dream and will take more than the billion and a half to build- lots of competiton already in the space from the brazilians and chinese and not a single firm order after 5 years of shopping it. Add a dollar to earnings? thats the kind of analyst nonesense that got the markets into the mess in the first place.
The average aerospace downturn (in the last 50 years of the jet age) takes out 50% of the production. The big ones (1971) take out 70%. This one is a big one- and B-jet charters are already down 40% y/o/y. 10-20% bjet decline- thats more non sense as well.
Go back to the model and plug in a 60% decline, a 2 year late c-series and sales of that 25% below expectations and then you have the stock price.

2009 Mar 26 04:38 AM