RBC: Gd results implications for BBDConnecting the Dots: BBD flash read-through – GD's Aerospace Q2 results
Sentiment: Neutral Our view. We view GD's Q2 results as a neutral read-through for Bombardier (GD shares down -5% today). Aerospace results and deliveries improved significantly y/y, from higher large cabin deliveries (driven by the G700) and services contribution. However, margin performance was below consensus as higher supply chain-related and certification costs impacted profitability. Key is the company noted supply chain is improving and flagged lower margins as more of a function of learning curve for the G700 and, therefore, in our view less of a concern regarding BBD's product portfolio. We see persistent yet improving supply chain challenges as in line with our expectations for Bombardier and, therefore, look to these results as neutral. Book-to-bill fell to 0.9x for the quarter (in line with management's expectation for 1x for the year), on the higher deliveries; however, we note orders stayed strong, up +10% sequentially, which we see as a positive sign demand remains solid. Looking into the back half, the company spoke to headwinds from geopolitical events and the US presidential election, though expects a robust H2 as interest remains high with the expiration of accelerated depreciation at the end of the year. Tomorrow on BBD's conference call, we will look for more colour on the supply chain and impact of US elections as well as geopolitical events on the sales cycle.