Bombardier unveiled solid financial results in the second quarter, said analyst Benoit Poirier of Desjardins Securities. (Picture: courtesy)
What to do with Bombardier, Cascades and Lion Electric shares? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from the one expressed.
Bombardier (BBD.B, $25.74): the Desjardins analyst raises its target price
The business jet manufacturer unveiled solid financial results in the second quarter, said analyst Benoit Poirier of Desjardins Securities.
He believes management’s full-year 2022 guidance is conservative and could be raised again as management delivers what it promised to improve the company’s profit margins.
“We remain optimistic on the short and long-term outlook for Bombardier and recommend that investors reconsider their view of the stock,” he wrote. Bombardier’s stock has fallen sharply since the title’s consolidation, before rebounding just over 10% on Thursday following the publication of financial results.
Benoit Poirier points out that the increase in demand is closely linked to the problems of commercial aviation which are pushing some customers to opt for business jets.
In its earnings release, Bombardier reported a book-to-unit ratio of 1.8 in the second quarter. The order book thus increased by 37% over one year, reaching 14.7 billion US dollars (B$). “Chief Financial Officer Bart Demosky said in June that even with a ratio of 1, the company would manage to generate positive cash flow,” recalls the analyst.
Bombardier pleasantly surprised analysts by having generated free cash flow of 341 million US dollars (M$) during the quarter, while the Desjardins analyst forecast a decline of $147M (analyst consensus at – $78M).
The company forecasts its cash flow for 2022 to be over $515M, down from the previous forecast of “over $50M”. The analyst anticipates $759m, while the analysts’ consensus is at $196m.
Benoit Poirier also points out that the after-sales services division generated revenues of $359 million in the second quarter, up 22% year on year and exceeding its pre-pandemic revenues for a fourth consecutive quarter.
Thanks to these good financial results, the analyst predicts that the company will be able to repay between $750 million and $1 billion in debt over the next nine months.
The analyst maintains his Buy recommendation on the stock and slightly raises its one-year target price from $80 to $82, reflecting an enterprise value/earnings before interest, taxes and amortization ratio of 2023 (EV /EBITDA) by 8.5 times, betting on an EBITDA of $1.19 billion next year.