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.
The company has just completed the first test flight of its new CSeries passenger jet. The test flight was a success. It had planned to begin flight tests in June, but needed 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 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.
Canadian stock market: Orders from Europe and Asia send train revenues up
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. 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 $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%.
In the latest edition of The Successful Investor, we look at Bombardier’s earnings outlook and examine the prospects of success for its CSeries jet. We conclude with our clear buy-sell-hold advice on the stock.
(Note: If you are a current subscriber to The Successful Investor, please click here to view Pat’s recommendation in the latest issue. Be sure to log in first.)
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
In recent years, Bombardier has had some setbacks with its business jets, but these have often been offset by gains in its train division. When a stock is diversified in its products, do you consider this an asset, or do you worry that a poorly performing division can drag down the company’s results?
Comments
Marcel
I consider this diversification as an asset for BOMBARDIER. Altough I did not so far have a very positive payback with the shares I bought, I remain positive with the stock.
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I consider this diversification as an asset for BOMBARDIER. Altough I did not so far have a very positive payback with the shares I bought, I remain positive with the stock.