Bombardier Is a Good Investment

With demand for business jets peaking, unfavorable foreign exchange headwinds, and continued volatility in the global market, some investors may question whether the Montreal plane and train maker, Bombardier Inc.(BDRAF.PK), is still a good investment.

"We believe the answer is yes," said UBS analyst Fadi Chamoun, in a note to clients Thursday. The 18% slide in the company's share price since the beginning the year should provide a good entry point, he said.

"In our view, the [earnings per share] risk is moderate given strong backlog and improved execution while the financial risk is being lowered as a result of improved margins and free cash flow, which is being used to repay debt," Mr. Chamoun said.

While noting that the strong loonie and a downturn in the economy remain a threat to business jet demand, the C$4-billion Transportation division is far less cyclical.

Mr. Chamoun has a 'buy' rating and a C$7.25 price target on the stock. He said he estimates earnings per share in its current fiscal year of C$0.21, increasing to C$0.32 the following year. "We believe that the risk to earnings projections through fiscal 2010 is moderate."