Bombardier Inc. T.BBD.A

BMO Rises BBD.B target to $7.50

[bigguy6]

fyi...bmo maintains outperform rating and raise's target to $7.50....

"

"Bombardier

(BBD.B-TSX)

Stock Rating: Outperform

Industry Rating: Outperform

February 6, 2011

Research Comment Summary

Toronto, Ontario

Fadi Chamoun, CFA

BMO Nesbitt Burns Inc.

[phone]

[e-mail]

Assoc: Francisco Lung

Raising F2011 Delivery & Cash Flow Forecasts

Event

Following a marked acceleration in business jet demand over the past few

months, we believe that Bombardier monetized aircraft from inventory and

improved cash from operations in fiscal Q4/11. We have raised our aircraft

deliveries and free cash flow forecasts. We now project Bombardier could finish

F2011 with ~$3.5 billion in cash on hand up from $2.7 billion at the end of

Q3/F11.

Impact

We expect production rates could increase modestly in F2012 primarily as a

result of a growing backlog of large cabin aircraft. It is not unrealistic, in our

opinion, to see business jet orders improve in F2012 and underpin a 15% or

more increase in production rates starting in F2013. We believe that BA can

achieve 10–12% EBIT margin at similar volume to pre-downturn levels and

expect management to provide guidance towards this end concurrent with

Q4/F11 results on March 31.

Forecasts

F2012 & F2013 EPS are raised by 4% and 5% respectively.

Valuation

Our NAV-based price target is raised to $7.50 from $7.00.

Recommendation

We project EPS power of around
.60 within three years underpinned by a

recovery in business jets as well as steady progression in Bombardier

Transportation EBIT margin towards 8% over the next three years. While IFRS

will delay the recognition of improved results by one year, we believe that

improving orders and cash flow will underpin a higher valuation multiple. CSeries

& Learjet 85 execution risks remain our greatest concern, particularly as

we approach some of the key milestones later this year and early next.

(Full comment – 9 pages)

Price (3-Feb) $6.37 52-Week High

$6.43

Target Price $7.50? 52-Week Low

$4.25"