Business Jet Market: Transactions Still Scarce

Includes: BDRAF, GD, TXT
by: FP Trading Desk

The business jets market is being still characterized by an oversupply of new and used aircraft and the resulting pricing pressure, according to UBS’s monthly survey of industry stakeholders.

“Overall, we think our survey continues to reflect increasing customer interest on the back of 30-40% price declines along with what appears to be improved financing availability,” said David Strauss, UBS analyst, in a note to clients. “While interest has improved, actual transactions are still scarce as buyers’ and sellers’ expectations remain misaligned.”

Mr. Strauss says he still prefers manufacturers Bombardier Inc. (OTCQX:BDRAF) and Textron Inc. (NYSE:TXT) to General Dynamics (NYSE:GD).

He said he maintains his “buy” rating on Bombardier due in a large part to the strength of its transport segment, which he estimates is worth C$3 alone. Bombardier’s shares closed at C$3.73 Monday on the Toronto Stock Exchange.

“We think TXT can trade higher from here on an improved liquidity profile, and we prefer it to GD although we maintain “neutral” ratings on both names,” Mr. Strauss said.