TD: Flash NoteEvent
This morning, Bombardier has updated its strategic plan and 2025 financial targets. The company is hosting an investor call today at 9:00 a.m. ET.
Impact: POSITIVE
We view the company's decision to increase its delivery, revenue, EBITDA, and FCF targets for 2025 positively. Also positive, but more in-line with our expectation, the company lowered its net leverage target, a change that we believe should not be surprising to the market given the company's progress on deleveraging over the past two years. As expected, there were no changes to the 2023 guidance. We believe, and hope, that management is still applying some conservatism in updating 2025 targets, as they have with guidance and targets over the past two years. With this in mind, we are encouraged by the increased 2025 targets, and the implied confidence that management must have in order to raise targets given the current economic environment.
Deliveries: 2025 deliveries of approximately 150 aircraft, representing ~400-500 bps of incremental annual growth (vs. 2022), and compared to the previous target of 130-135, and the TD estimate of 140. Revenue: 2025 revenue of >$9.0 billion, up from approximately $7.5 billion, and compared to TD/consensus forecast of $7.7 billion/$8.3 billion. Adjusted EBITDA: 2025 Adjusted EBITDA of >$1.625 billion (18% margin), up from approximately $1.500 billion (20% margin), and compared to TD/consensus forecast of $1.510 billion (19.7%)/$1.544 billion (18.6%).
Free Cash Flow: 2025 FCF of >$900 million, up from >$500 million and compared to TD/consensus forecast of $577 million/$610 million. We view this as a significant revision with the increase relative to our expectations due primarily to lower interest expense and capex with a contribution from higher
Adjusted EBITDA. We are surprised by the capex indications for 2025 (lower-than-expected), and believe that higher spending should be assumed beyond 2025.
Net Leverage Ratio: 2025 year-end net leverage of 2.0-2.5x, which compares to its previous target of 3.0x and TD estimate of 2.0x.
Other: Defense revenue expected to increase to >$1 billion in the second half of the decade, and aftermarket service revenue to $2 billion by 2025 (unchanged)