Bombardier recently had to suspend test flights of its CSeries passenger plane because of a problem with its Pratt & Whitney engines, which are 20% more fuel-efficient than current models. This was the first major issue with this new engine in over three years of testing.
The delay will probably add to the CSeries’ development costs, but Bombardier still expects to begin deliveries in the second half of 2015.
BOMBARDIER INC. (Toronto symbols BBD.A and BBD.B; 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.
In the three months ended March 31, 2014, Bombardier’s earnings fell 3.2%, to $151 million from $156 million a year earlier (all amounts except share prices and market cap in U.S. dollars). Earnings per share were unchanged at $0.08. Revenue rose 0.3%, to $4.35 billion from $4.34 billion.
Revenue at the railcar division (52% of the total) rose 8.8%, as the company continues to win orders from public transit systems. This business ended the quarter with a record backlog of $38.4 billion, up 18.5% since the start of 2014.
However, revenue at the aircraft division (48%) fell 7.5%, partly due to last December’s sale of its Flexjet subsidiary, which leases business jets.
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Canadian stock market: Latest quarter sees significant surge in aircraft orders for Bombardier
Bombardier delivered 56 planes in the quarter, up from 53 a year ago. It also won orders for 91 aircraft (net of cancellations), up from just 28. As a result, this division’s backlog rose to a record $38.5 billion, up 3.2% in the past three months.
The company invested $509 million in new plants and equipment during the quarter, as it prepares to ramp up production of the CSeries and other planes. Full-year spending on these upgrades should still range from $1.6 billion to $1.9 billion.
The company’s long-term debt of $7.1 billion is 1.1 times its market cap. However, it can borrow up to $1.4 billion under its existing credit lines, which will let it keep investing in the CSeries and other products. Bombardier also holds cash of $2.5 billion, or $1.43 a share.
The $0.10-a-share (Canadian) dividend ($0.10156 for the class B shares) yields 2.6% (2.65% for the B shares).
In the latest edition of The Successful Investor, we look at the risk Bombardier faces with uncertainty over its CSeries jets and how it will affect the company’s share price and its dividend. We also assess the long-term prospects for its other business lines. We conclude with our clear buy-sell-hold advice on the stock.
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Bombardier recently had to suspend test flights of its CSeries passenger plane because of a problem with its Pratt & Whitney engines, which are 20% more fuel-efficient than current models. This was the first major issue with this new engine in over three years of testing.
