Bombardier v.s. General DynamicsWhich is better?
Bombardier and General Dynamics are the top two business jet manufacturers - each commanding about a 25% share of that market. Over the years the two have butted heads more than a few times. At one point GD was literally wrapping itself in the U.S. flag in an effort to compete with its biggest rival.
Bombardier itself is no slouch when it comes to advertising its broader product line-up. And despite its strong reputation for the upper end of this market - that's the high-quality/luxury larger business jets - GD's Gulfstream has moved in recent years to broaden its own product line-up by offering smaller jets.
To do this it acquited an Israeli aerospace concern which built smaller private jets called Galaxies. At GD they've become the G150, and G250.
Both companies have other units. Bombardier has its rail equipment division, and GD has its shipbuilding uinit, its combat vehicle unit, and its military intelligence and communication divisions. Although the two are fierce competitors in business jets, making direct comparisons can be difficult due to the differences in these other business lines.
While GD's other units make GD a larger company overall, and present more opportunity for growth, at the same time they also represent greater exposure to risk. Shipbuilding has been the weakest historically, but that division now appears to be increasing margins and backlog.
And of course, in a similar fashion, Bombardier's rail division has been performing well enough to help support the downturn in business jets.
While both companies have held up well during the downturn compared to the industry itself, GD's Gulfstream does appear to be weathering the turbulence a little better. There are a few reasons for this.
GD launched its popular new G650 just before the bottom fell out of the BJ market, and this has helped stem the subsequent cancellations and drying up of new orders.
Bombardier, for its part, had some trouble with the demise of Grob, and the contract work that company was going to do for the Learjet 85. And this may have increased the number of cancellations on that program due to the downturn.
But which company presents the better investment opportunity from here?
Well, both companies appear to have performed equally well over the past five quarters. Which is a pretty good indication of how well a company can hold up during a severe pull-back.
Both Bombardier and GD have about doubled since the first quarter of 2009:
BBD:
https://www.stockhouse.com/tools/?page=%2FFinancialTools%2Fsn%5Foverview%2Easp%3Fsymbol%3DT%2EBBD%2EB%26table%3DLIST
GD:
https://www.stockhouse.com/tools/?page=%2FFinancialTools%2Fsn%5Foverview%2Easp%3Fsymbol%3DGD%26table%3DNYSE
The big question as I see it for each company is what direction it chooses to take each of its business units. For example, Bombardier appears to be moving into larger commercial jet production, and I think this is the right way to go. But how you feel about that might colour your interest in owning shares of the company.
With GD you have to ask yourself why that company decided against building regional jets, or expanding into commercial jet aircraft, or even military aircraft itself. GD does have a joint effort with Elbit Systems to build Unmanned Aerial Vehicles. (UAVs).
In the interests of full disclosure, I've owned both Bombardier and General Dynamics for many years. In my view, both companies rate highly.
GD is ranked by Valu Line as one of the
safest companies on the NYSE. GD has low debt levels (usually somewhere around 25-30% of cap), employing debt - for the most part - only to do acquisitions - which it does very effectively. Then it is quick to pay that debt down in subsequent years.
Bombardier, builds aircraft which are every bit as good quality, and its shares probably represent greater value, but the company's debt load at roughly 60% of capitalization is still too high for many investors. On the other hand, it may be this heavier debt load, along with the greater negative focus on airlines in the media which makes Bombardier cheaper and therefor a better investment opportunity.
Something to think about anyway. As usual, I appreciate hearing your thoughts on this or anything else. And contrary to what some have said,
all comment is appreciated - whether you agree
or disagree. The only criteria I employ when reading a response or any other post is whether or not the writer is serious and appears to be trying to make sense.