NBF: Target at 79$ (from 72 $) maybe......100$?Target increased as we update our 2025 forecast
2025 financial targets raised
2025 revenue is now expected to be in excess of $9 billion (versus prior target
at ~$7.5 billion and our prior forecast of $7,639 million). The key driver of the
revenue improvement is an increase in targeted business jet deliveries (~150
versus prior target at 130-135 and NBF previously at 132). EBITDA is targeted
to be $1,625+ million versus prior target at ~$1,500 million and prior NBF
forecast at $1,410 million.
FCF priorities outlined
Bombardier's new 2025 FCF target is $900+ million (versus prior target at
$500+ million and NBF previously at $628 million). Management indicates that
this solid free cash flow generation could be used to pay down additional
debt, for potential M&A (more likely tuck-ins), or to fund an all-new aircraft
program. We note, however, that management does not see a need to launch a
new aircraft until sometime after 2025.
Defence a longer-term growth driver
The company expects that it can triple its defence revenues in the second
half of the decade and is targeting revenues from the defence segment in
excess of $1.0 billion beyond 2025, with the majority coming from incremental
aircraft deliveries and the remainder coming from engineering services and
modification work. Over the next 10 years, Bombardier Defence expects ~375
industry deliveries in identified markets.
Maintain SP, but target increased to $79.00
With a solid backlog, positive margin trends and decreasing leverage, we
remain confident that financial results will continue to improve over the next
several years. However, with some business jet metrics slowing as well as
growing macroeconomic uncertainty, upside for the stock may be limited in
the near term. As a result, we keep our Sector Perform rating, but would be
adding to positions on share price weakness. Our new target is $79.00, up from
$72.00.
Target increased, but maintain Sector Perform
With a solid backlog, positive margin trends and decreasing leverage, we remain confident that financial
results will continue to improve over the next several years. Furthermore, if Bombardier can achieve its new
2025 targets, we see a path to a C$100.00+ share price over the longer term. However, with some business
jet metrics slowing (utilization rates down y/y, increase in used inventory for sale, albeit modest) as well as
growing macroeconomic uncertainty, upside for the stock may be limited in the near term. As a result, we
keep our Sector Perform rating, but would be adding to positions on share price weakness.
We continue to base our valuation on our 2025 estimate, which assumes EBITDA of ~$1.45 billion (versus
management’s $1.625 billion target). We apply a 7.0x EV/EBITDA multiple to our 2025 estimate (prior cycle
low valuations for some of Bombardier’s business jet peers were in the 7-8x range). This results in a future
target of C$95.80 which we discount by 10%/year to arrive at a new target of C$79.00, up from C$72.00
previously.
NOTE from LB1 : 2025 forecasts by NBF is significantly lower than the BBD objectives with 140 deliveries, 8 140 M$ revenues and 1449 M$ EBITDA. I understand some scepticism, (or balanced position?) If Bombardier were ahead of these objectives, the target will be in the 90's and over.