Bombardier Transportation Eyes Big Apple Contracts

Bombardier Inc.'s (BDRAF.PK) Transportation division could be in line for some substantial new business courtesy of the Big Apple's transit commission, according to Desjardins analyst Benoit Poirier.

Mr. Poirier, who recently attended a tour of Bombardier Transportation's Plattsburgh, New York facility, told clients in a note that Bombardier management expects the New York Metropolitan Transit Authority [MTA] could grant two new contracts worth up to $2.7-billion or an average of$1.5-million per car in the next year and a half.

The first contract could require 800 to 900 M-9 cars, the analyst said, while the second opportunity would require 1,000 R-179 cars.

He said the potential contracts offer real opportunity for the Plattsburgh plant to increase its revenue visibility. Currently, 634 cars are expected to be delivered out of the facility.   

Given the existing strong relationship with New York City and the implications of the MTA's 2008 - 2013 capital program, we believe Bombardier is very well positioned to receive the contracts.

Time, of course will tell, and in the near term, Mr. Poirer told clients that they can look forward to solid financial results, when Bombardier reports first quarter earnings next week.

He expects overall revenue of $4.2-billion and earnings per share of C$0.07 compared with consensus of C$0.08. 

The analyst wrote:

From a seasonality standpoint, 1Q is the softest quarter for Aerospace, but some catalysts we will be looking for include a CSeries update and a potential increase in Aerospace margin guidance. 

He added that recent booking activity on the Transportation side is strong with margins likely to trend upward.

Mr. Poirier reiterated his "buy" rating and left his C$8.55 price target unchanged.