Missed targetsI have not been around and plan on going south soon, so was quite surprised at decline in s.p. After reading the news, and reviewing the earnings warning, I have come to the conclusion that this current state of affairs is an over reaction. As well all the talk about selling off more assets.
My opinion; earnings warning of $600 mil lower earnings - OK, disappointing yes, but this is only because train and Global deliveries were short at year end. Revenue thus down a bit but we are talking about maybe $1B from an annual $16 B sales. Why such a decline in share price from a 6% miss on revenue? The share price was low to begin with which also makes it seem this was a huge overreaction,. On the other hand, missing deliveries could be indicative of greater issues and thus a great lack of confidence. The lack of confidence only means that it will take longer for Bombardier to demonstrate deliveries in order to rebuild the conficence. Seeing how NYC and Toronto are now seeing results is a very good thing. Just missed the Dec timeline though. Need more patience. Euro deliveries - I recall how a couple of years ago there was a decision to improve things at BT by making more parts in common on various trains. That makes sense. I am guessing that the current issues have to do with making these common parts now fit. This is my explanation as it does not make sense that a design that had zero issues all of a sudden has issues! Changes were made and glitches ensued. The glitches will be resolved. It is not a huge deal. Frustrating yes, but not one that should result in huge decline in share price. Remember, they have $35 BILLION in orders, about 4 years worth of work! Sales are not an issue. Profit is planned at 10%. No problem there. Simply issues with quality control affecting deliveries. Should not have been so negative on share price.
Compare that to Boeing and the Max issues. This is huge for Boeing. There is a good chance the Max will have many cancellations, as I am certain the FAA will re-certify it, despite the fact it is a flying coffin bad design - PLUS Boeing still has a LOT of neg cash to be paid out due to the crashes. Yet the Boeing price is still not cratering. Why? There is a big hit coming their way. Wait until people refuse to get on the flying coffin. Over confidence in Boeing shareprice compared to well under confidence in Bombardier.
As for the Globals. I hope to hear about why deliveries were delayed? Again, I am certain that the issues will be resolved. And again the overreaction to the problem. Come on, 4 planes! $300 + M. Should NOT be a huge issue. And keep in mind - these planes are SOLD so money WILL come in. I just would love to see the ramp up done well.
Now for the JV. It is very clear that Airbus wants a 500. Perhaps they wanted Bombardier to ptich in on cost of development. So yes, they balked. Why would they participate? So this seems to be a play by Airbus to get something out of Bombardier. Yes, we may get less from the JV than hoped for. So much for that. It still does not account for the huge drop in s.p.
Last comments: the debt. I am quite certain the delivery issues impacted the goal of paying off a significant loan in 2021. However, we cannot see this as a complete fail. As long as efforts are proceeding to pay down debt then that is good. I see from Bellemere that this is indeed a focus. GOOD.
Overall, I see this latest decline as an overreaction. Great buying opportunity. Just wait untill we see the small issues resolved and cash start piling up to be used to pay down those debts. Should be a great year ahead. Enjoy... now let me pack for Caribbian.
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