RE:une rencontre et une visite d’usine renforcent la confiance ENGILSH TRANSLATION :
What to do with the titles of Bombardier, Quebecor and Stantec? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
Bombardier (BBD.B, $65.70): Meeting and factory tour boost BMO confidence
BMO Capital Markets' Fadi Chamoun emerged from client meetings with two executives and a tour of the Montreal business jet completion plant more confident than ever in his stock outlook and optimism .
An exchange with Bart Demosky, chief financial officer, and Francis Richer de la Flche, vice-president of financial planning, even prompted him to raise his profit forecasts for 2023 (from US$3.04 to US$3.11 per share) and for 2024 (from US$4.55 to US$4.59) and its target price.
Essentially, the well-filled order book as well as the still solid demand for business jets gives a lot of “visibility” to the revenue outlook. Despite the moderation of certain indicators in this aviation niche, pre-owned business jet inventories are low, demand remains resilient and, above all, orders in hand strengthen the revenue trajectory until 2024, lists the 'analyst.
Bombardier has made a strong case for ensuring that robust demand will continue and that orders received will continue to exceed deliveries. If not, Fadi Chamoun believes the manufacturer is well positioned to navigate a recession given that its balance sheet and liquidity are stronger than before. In this less optimistic scenario, the demand for the jets would be lower than the rate of the devices produced, forcing the manufacturer to reduce its production.
The analyst expects cash flows of US$350 million in 2023 and more than US$500 million in 2024.
The fact that Bombardier has exceeded the game plan targets set in 2020 despite supply problems and inflation gives him confidence that the manufacturer can generate strong excess cash flow while reinvesting as needed. Fadi Chamoun also believes that Bombardier used conservative assumptions to establish the guidelines for 2023.
The BMO analyst is also among those who believe the company is on track to exceed revenue, operating profit and free cash flow targets set for 2025. Bombardier may raise them at the annual investor meeting of March 23.
Fadi Chamoun envisions a financial framework by 2025 that would see Bombardier "deliver free cash flow of US$500 million per year, post a debt ratio of less than twice operating income while financing the no new devices.
In the end, the analyst increases his target price from $75 to $80 and reiterates his buy recommendation. This target represents a multiple of 8 times the average operating profit it forecasts in 2023 and 2024.
Bombardier stock has more than tripled since hitting a low of $18.30 in July 2022.