RBC Dominion Securities - James McGarragle In separate reports released Thursday, Mr. McGarragle assumed coverage of both Bombardier Inc. (BBD.B-T) and Chorus Aviation Inc. (CHR-T) with “outperform” recommendations.
On Bombardier, he said: “We see Bombardier as benefiting from several key drivers in both the near-term and the long-term, including existing and new areas of revenue growth, margin improvement through continued production ramp and improved mix, as well as lower debt levels from higher sustainable FCF. We expect these drivers to result in a re-rate higher in the shares. Longer-term, we see Defense, Services, and Certified Pre-Owned (CPO) as GDP-plus drivers of growth out to 2030. We assume primary coverage of Bombardier and continue to see a significant investment opportunity in the shares.”
His target of $95 is a new high on the Street. The average is $75.53.
“Bombardier has changed but sentiment on the stock has not; why we believe the shares should re-rate higher,” said Mr. McGarragle. “The operational improvements and impressive deleveraging from 7.7 times to 3.3 times (’21 to ‘23), as well as upside levers discussed above, makes us question whether the 45-per-cent valuation discount to peers is entirely appropriate. We believe shares are primed for a re-rating given solid execution, debt reduction, and FCF growth, all of which we expect to erase the historical valuation overhang over time.”