Nat bank: 79$ to 85$Q1 EBITDA ahead of NBF
Revenue was $1,453 million versus NBF at $1,536 million and consensus of $1,415 million while Q1 business jet deliveries were 22, compared to our forecast for 26. The adjusted EBITDA margin was 14.6% versus NBF at 12.0%. Q1 free cash flow usage was $247 million versus NBF estimate of $202 million usage. Bombardier's 2023 guidance and 2025 targets are all unchanged.
Backlog stable
Order backlog was stable in Q1 at $14.8 billion compared to the same number in Q4/22 despite significant macroeconomic volatility. The unit book-tobill came in slightly below 1.0x at 0.9x. Bombardier's solid backlog provides visibility on the company's planned delivery ramp from 123 jets in 2022 to 150 in 2025. Strong growth in high-margin services revenue also gives us confidence in our forecast for revenue growth and margin expansion over the next several years.
Material potential upside for the stock
If Bombardier can achieve its 2025 EBITDA target of $1.6 billion, based on a reasonable 7.0x EV/EBITDA multiple, we would derive a future valuation of ~C $115.00/share. Using our more conservative 2025 estimate, we still derive a future target of over C$100.00/share, which is materially higher than where the stock is trading today.
Raised to Outperform
We are upgrading Bombardier shares to Outperform from Sector Perform and are increasing our target to C$85.00 from C$79.00 previously. We downgraded Bombardier in February this year following a tremendous run for the stock through 2022, and since that time the stock has traded ~12% lower. Given that financial results have subsequently come in above our expectations and the company increased its 2025 targets in late March, we see the current share price as a more attractive entry point.