Speculation On Earnings Tomorrow Seems we're seeing a bit of a run-up on the earnings release tomorrow. For anyone who hasn't watched this company for a long time, it isn't unusual to see a bit of a run-up in anticipation of either a positive surprise in earnings, or the announcement of a new order, which sometimes gets announced with results.
My guess is this comes as a result of the speculative crowd that moves in to bid up the price of any company making an announcement where the negatives have weighed heavily on how the entity is perceived. This crowd will buy into anything where things could possibly create a bounce.
The minute nothing special is announced they bail, moving the share price right back to where we started. Even if/when things do show incremental improvement this crowd bails when nothing big signals reason for change in optimism. Rarely if ever do they stick around long.
While the outlook for business jets, regional jets, turboprops continue to improve, and the outlook for Bombardier in general, continues to build, these considerations aren't likely to move the share price to a point where its price earnings multiple exceeds that of its industry, and competition.
Bombardier's PE remains consistent with that of companies like General Dynamics whose Guflstream unit is its main business jet competitor. Despite the idea that rail should probably garner a little better multiple than defence businesses, the rest gets valued at roughly similar levels.
Defence issues are currently depressed due to expected cuts in U.S. defense spending. We might expect a little more optimism for rail, but then with governments in europe (still one of the biggest markets for rail equipment), investors probably expect somewhat less robust demand.
On the other hand, defence companies seem more restricted in terms of how effectively they can be expected to market their products in places like Asia.
Another concern is the lithium battery. If Boeing and Airbus are using these to help achieve weight reductions, it seems reasonable to assume Bombardier is doing the same with CSeries. Airbus recently announced that it is changing to more conventional batteries for its new 350 (its response to Boeing's787).
It's probably too late for Bombardier to do the same. Such a move requires re-writing a lot of software and probably the entire electrical grid.
It's a big problem that has both the Japanese (a Japanese supplier builds these batteries) Boeing, and probably Airbus, and a lot of other people trying to find a solution.
if a quick fix isn't found soon it could jepardize not only 787 sales, but a lot of other aircraft currently under development.
In conclusion, even if orders, sales and earnings are building nicely, certain considerations create sufficient risk to caution even seasoned investors in this industsry.