Let's hope so.....GLTAL 11:06 AM EDT, 06/14/2022 (MT Newswires) -- Bombardier Inc. (BBD-A.TO, BBD-B.TO) is a deep-value stock even as a pure-play business jet maker and its valuation is disconnected with fundamentals, Scotiabank analysts said in a report.
The bank said it has a positive view on Bombardier and noted the company completed the previously announced 25:1 share consolidation effective June 13. Bombardier consolidated each class of shares to have 12.3 million Class A shares and 85.4 million Class B shares outstanding.
It said that while some investors were concerned consolidation was intended to keep the stock from falling below $1.00, the primary reason was to reduce the stock's volatility, which may help attract long-term investors.
The bank noted that the current risk-off environment is supporting the bears, with the company's stock down about 50% since September 2021 due to reasons such as Gulfstream's launch of new business jets and the impact of the Russia-Ukraine conflict on supply chain.
It also noted that Bombardier is trading at 6.5x, 5.5x and 4.5x EV/EBITDA on 2023, 2024 and 2025 estimated earnings, compared with closest competitors General Dynamics (NYSE: GD) and Textron (NYSE: TXT) trading at 8x-12x on 2023 estimates. It thinks Bombardier's 6.5x valuation could potentially be as low as it can get in this cycle.
Scotiabank said Bombardier's management has been executing "very well" on the five-year plan, consistently beating the Street, deleveraging, and turning free cash flows around, as the business jet market remains solid.
It said that the company's fundamentals are robust after four consecutive quarters of strength and that its backlog at $13.5 billion is approaching the pre-pandemic peak of $14.4 billion. The bank also said Bombardier is well positioned to partially redeem or refinance upcoming debt maturities of $800 million in 2024 and $1.3 billion in 2025.
Scotiabank maintained its Sector Outperform rating and said Bombardier offers the highest potential return in its coverage. It revised its target to $55 from $2.35 before consolidation.