Earnings Preview: Bombardier Aerospace Margins in Focus:

While Bombardier Inc. (BDRAF.PK) delivered 67 business jets in the second quarter of calendar 2008 – flat with the first quarter but 18% higher than the same period last year – since its fiscal year does not correspond to the calendar year, it is difficult to accurately predict what the numbers mean for the company’s upcoming results.

“However, higher potential deliveries with a better mix of higher margin aircraft would clearly boost sales and earnings for the Aerospace division,” Versant Partners analyst Cameron Doerksen said in a research note.

Bombardier is due to report second quarter results for fiscal 2009 before markets open on Sept. 4, with the consensus looking for revenue of US$4.6-billion and earnings per share (EPS) of US11¢. But analysts differ on whether the company will beat or miss these numbers.

Benoit Poirier is forecasting EPS of US9¢ and said it is likely that the company will release new Aerospace margin guidance given the division’s new president and COO’s statement that he would do so in the next few months on the first quarter conference call. “If he does not, investors could be disappointed,” Mr. Poirier said.

The analyst thinks Bombardier Aerospace could achieve a “conservative” EBIT margin of 12% in the long term, but in the next two years believes investors would be happy with 10%. He currently forecast 9.4% in fiscal 2010 and expects margin improvement will be a key driver of the company returning to investment-grade status.

Mr. Poirier rates Bombardier shares a “buy” with a $11 price target.

UBS analyst Fadi Chamoun is more optimistic with an EPS projection of US12¢ compared to US5¢ a year earlier. He also expects an Aerospace margin of 9.7% versus 9.0% last year and 8.4% in the previous quarter.

The analyst said business jet orders remained strong in the second quarter and should be enough to replenish Bombardier’s already healthy backlog.

He rates the shares a “buy” with a $10.50 price target, noting catalysts such as strong quarterly results, upgrades to Aerospace margin targets and more CSeries order announcements.

Mr. Doerksen at Versant rates the stock a “buy” with a $9 target.