TDEvent Bombardier
reported Q4/21 Adjusted EBITDA of $232 million compared with our forecast of $211 million and consensus of $200 million. Adjusted EPS was $0.03 compared with our forecast of -$0.02.
Impact: POSITIVE
We are maintaining our C$3.00 target price and SPECULATIVE BUY recommendation. Our 2022/2023 EBITDA forecasts decline slightly as a result of our updated delivery mix assumption. Although it appears that fewer large cabin deliveries will occur in 2022 relative to our previous forecast, we believe that the management's plan for 15-20% production rate increases in 2022 will lead to the anticipated step-up in large cabin deliveries coming to fruition in 2023.
With the exception of adjusted EBITDA, our 2022 forecasts were already in line with the new guidance prior to the release of Q4/21. After minor adjustments, our 2022 adjusted EBITDA forecast remains comfortably ahead of guidance for greater-than $825 million. Although we do not anticipate expectations will adjust higher in the short term, we believe that there is significant upside over 12 months to the guidance and current consensus expectations.
We believe that the $250 million in previously identified cost savings, reduced Global 7500 manufacturing costs, stronger aircraft pricing, and increased highmargin aftermarket services revenue will result in approximately $1 billion in EBITDA in 2022, despite cost inflation and modest currency headwinds. Our 2023 delivery forecast is 8% above 2022, a level that we believe also offers upside potential based on production rate increases of 15-20% planned for 2022. Our 2024 and 2025 financial estimates are relatively unchanged.
Bombardier has demonstrated early success in executing on its turnaround strategy and exceeding 2021 guidance. We believe that each successive quarter of delivering on financial targets will draw attention to the significant share price upside should Bombardier achieve them. We are encouraged by Bombardier's prudence in managing expectations in what is currently a robust business aircraft market.
TD Investment Conclusion
We believe that Bombardier's business aviation franchise is strong and that there is potential for long-term earnings that justify a higher share price. Although financial leverage is high and elevates the risk profile of a standalone business jet company, we believe that risk-adjusted upside justifies acquiring the shares.