BOMBARDIER INC. (Toronto symbols BBD.A $5.08 and BBD.B $5.06; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $8.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.bombardier.com) is the world’s third-largest commercial aircraft maker, behind Boeing and Airbus. It is also the world’s leading passenger railcar manufacturer.
The company has postponed the first test flight of its new CSeries passenger jet. It had planned to begin flight tests in June, but it needs extra time to upgrade the plane’s software.
Bombardier has firm orders for 177 CSeries jets, plus options for 211 more. If the buyers exercise all these options, the resulting 388 orders would be worth $26 billion (all amounts except share prices and market cap in U.S. dollars).
The company is also selling its Flexjet subsidiary, which leases business jets to corporations, to a private equity firm for $185 million. In addition, the new owners have agreed to buy up to 245 jets from Bombardier over the next few years. If they exercise all the options in this deal, it would be worth $5.2 billion.
Meanwhile, Bombardier’s revenue rose 8.1% in the three months ended June 30, 2013, to $4.4 billion from $4.1 billion a year earlier. Revenue from the aerospace division (51% of the total) fell 0.4%, as it delivered fewer planes. However, revenue from the train business (49%) jumped 18.7% thanks to new orders from public transit systems in Europe and Asia.
Earnings fell 5.4%, to $158 million from $167 million. Due to more shares outstanding, earnings per share were unchanged at $0.09. Bombardier’s profits fell due to a 21.0% jump in research costs related to the development of the CSeries. It spent 1.7% of its revenue on research in the latest quarter.
The company should earn $0.41 U.S. a share this year, and the stock trades at 12.0 times that estimate. The $0.10 (Canadian) dividend yields 2.0% for the class A voting shares; the $0.102 dividend paid on the more liquid class B subordinate voting shares also yields 2.0%.
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