TD: Q1 = a bang!Q1/23 Canadian Aerospace and Defence Preview
Our Canadian A&D coverage group will start reporting Q1/23 results on April 27. We forecast that Q1/23 results will be in line with consensus, except for Bombardier, which we believe could exceed consensus EBITDA estimates (adjusted EPS is NM). We have adjusted our group forecasts to reflect updated economic, currency, interest rate and aircraft production-related assumptions, the net impact of which is immaterial to our forecasts. Our recommendations (Exhibit 2) remain unchanged.
Strength in Bombardier and CAE's share prices have resulted in returns to our targets that meet TD's threshold for BUY recommendations. However, we believe that it is prudent to review Q1/23 results and make any appropriate revisions to our financial forecasts before considering any changes to our recommendations and/or target prices.
Bombardier:
We forecast 41% y/y growth in Q1/23 Adjusted EBITDA, in line with the 40-50%+ growth over the past three quarters. Growth is due to a 19% increase in deliveries and margin expansion from declining costs on the Global 7500, improved pricing, aftermarket services growth, and other cost-saving initiatives. Although the extreme undervaluation of 2022 has largely corrected, we still view the current valuation and deleveraging potential as providing attractive risk-adjusted upside potential for investors.
Dtailed numbers are:
Revenues: 1 426 M$
EBITDA: 235 M$
Deliveries : 25
Orders: 37
Book-to-bill: 1,5
Booking: 15, 464 M$