Desjardins: Pleased with the resultsBBD no stranger to implied 4Q delivery dynamics
The Desjardins Takeaway
While the beat this quarter did not translate into a guidance increase for the year, we remain quite pleased with the results overall and the strong execution. We believe the market does not fully appreciate BBD’s booking 39 jet orders in a seasonably weaker quarter and being the only OEM to beat consensus deliveries. The negative stock reaction is a buying opportunity in our view, as the story has not changed. BBD executed on a big 4Q last year—we are comfortable with the implied delivery ramp.
Highlights
Beat on deliveries driven by pull-forward dynamics; 4Q will once again drive the show. BBD delivered 39 jets in 2Q (19 Globals and 20 Challengers), ahead of consensus of 32 and our estimate of 33 as some orders were pulled forward into 2Q from 3Q. Fewer deliveries are now expected in 3Q, meaning that 4Q will once again drive the show with ~40% of annual deliveries. We emphasize that BBD is no stranger to this trend, as it has occurred many times in the past and the company has a track record of executing well. On the Toronto strike, management stated it would not impact guidance as most of the jets that will be delivered this year are already in Montral being readied for completion. The 2024 target for 150155 deliveries was reiterated by management; we now forecast 151 deliveries in 2024 and 155 in 2025, with the mix of Challengers vs Globals shifting from 76 vs 75 in 2024 to 74 vs 81 in 2025.
Capital deployment priority remains to pay down ~US$800m of debt in the next 18 months. BBD reiterated that the #1 priority for excess FCF remains debt repayment, and it intends to pay down ~US$800m of debt over the next 18 months. Once that goal is achieved, management will consider deploying excess cash toward either: (1) shareholder returns; (2) investments in the existing fleet; or (3) small opportunistic vertical M&A in problematic areas of the supply chain
Valuation
Tweaking our estimates but maintaining our target of C$143. Our target is based on an unchanged EV/EBITDA multiple of 8.6x on our 2025 EBITDA forecast of US$1,630m. We also increased our exchange rate to C$1.38/US$1 (from C$1.37/US$1).
Recommendation
We reiterate our bullish stance. We believe the current share price provides an interesting entry point for long-term investors.