Join today and have your say! It’s FREE!

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.
Please Try Again
{{ error }}
By providing my email, I consent to receiving investment related electronic messages from Stockhouse.

or

Sign In

Please Try Again
{{ error }}
Password Hint : {{passwordHint}}
Forgot Password?

or

Please Try Again {{ error }}

Send my password

SUCCESS
An email was sent with password retrieval instructions. Please go to the link in the email message to retrieve your password.

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.
Quote  |  Bullboard  |  News  |  Opinion  |  Profile  |  Peers  |  Filings  |  Financials  |  Options  |  Price History  |  Ratios  |  Ownership  |  Insiders  |  Valuation

Bombardier Inc. T.BBD.A

Alternate Symbol(s):  BDRPF | T.BBD.PR.B | BDRXF | T.BBD.PR.C | T.BBD.PR.D | BOMBF | BDRAF | T.BBD.B | BDRBF

Bombardier Inc. is a Canada-based manufacturer of business aircraft with a global network of service centers. The Company is focused on designing, manufacturing and servicing business jets. The Company has a worldwide fleet of more than 5,000 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. It operates aerostructure, assembly and completion facilities in Canada, the United States and Mexico. Its robust customer support network services the Learjet, Challenger and Global families of aircraft, and includes facilities in strategic locations in the United States and Canada, as well as in the United Kingdom, Germany, France, Switzerland, Austria, the United Arab Emirates, Singapore, China and Australia. The Company's jets include Challenger 350, Challenger 3500, Challenger 650, Global 5500, Global 6500, Global 7500 and Global 8000.


TSX:BBD.A - Post by User

Post by Tempo1on Sep 16, 2024 7:53am
366 Views
Post# 36225094

RBC: Positive view from an expert

RBC: Positive view from an expertBizJet KOL sees optimistic delivery and positive fractional outlook, continued normalization

Maintaining Outperform on Bombardier and General Dynamics


Our view: On Friday, we hosted Brian Foley, a well-recognized industry expert on business jets, for a discussion on the evolving industry dynamics and fundamental backdrop. The discussion focused on the current business jet fundamentals, macro outlook and implications for demand, current backlogs and production expectations, as well as a look into the supply chain. Foley remains optimistic on expected production and delivery plans into 2025 (his target is ~810 deliveries) and sees the industry holding at a ~1x book-to-bill into 2025. While we view the outlook as generally positive for the business jet outlook, Foley called out a significant mix shift to fractional ownership, which can be a positive for higher utilization levels (services and accelerated replacement cycle) but can also limit individual sales. Declining interest rates are not expected to be a tailwind, and Foley sees less ESG risk, but greater tax, fuel and flight tracking and shaming as watch items for the industry. We continue to rate shares of both General Dynamics (Gulfstream production increases, margin upside, G800 cert) and Bombardier (services and defense upside, 2025 free cash flow inflection on increased Global deliveries) Outperform based on our bullish bizjet sector view

Industry expert call supports a strong 2024–26 production outlook for business jets. Brian Foley sees the industry delivering more than 800 aircraft in 2024 and averaging ~800/year through 2033. Foley discussed that he specifically models conservatively, adjusting for global pullbacks every ~10 years. We view his insight as cautiously optimistic on the industry fundamentals, as Gulfstream and Bombardier have significant backlogs for their fleets (~$20B and ~$15B, respectively). Despite the elevated backlogs, Foley detailed bizjet utilization as hitting a historic high and remaining significantly higher compared to 2019. His view that the industry can hold a ~1x book-to-bill even as the OEMs work through backlogs is one that we also share. The demand for business jets remains robust, and despite some bearish sentiment in the market, we see orders as being largely unaffected by geopolitical or macro factors, a slight divergence from prior ordering cycles.

Strong mix shift to fractional ownership. Our discussion with Foley highlighted the notable surge in fractional ownership activity since the pandemic, which presents a favorable tailwind for aftermarket services. In North America, fractional activity has risen by 12% YoY and an impressive 52% since 2019, whereas individual and corporate-owned aircraft have experienced declines of -10% YoY and -3%, respectively, over the same period. According to Foley, this uptick in fractional ownership can be attributed to several factors, including flight-tracking capabilities, the stigma associated with private aviation (“flight shaming”), and decreased tax incentives for individual owners. These challenges are easily addressed through fractional programs, making them an attractive solution for many customers. Notably, fractional aircraft tend to operate at significantly higher utilization rates than privately owned aircraft (5–6 times higher), generating greater maintenance needs and replacement parts requirements. Nevertheless, Foley also acknowledged two key risks related to large-scale fractional purchases: 1) they often yield lower profit margins for OEMs due to bulk discounting; and 2) they may divert attention away from individual owner sales, potentially reducing total jet sales.

We maintain our Outperform rating on Bombardier (BBD). Key takeaways from our discussion with respect to BBD centered around three primary themes: 1) a favorable demand environment for aftermarket services; 2) ongoing popularity of large-cabin jets; and 3) a robust industry delivery forecast. Considering these factors together in the context of BBD’s modest delivery target of ~150 aircraft annually after 2025 increases our confidence in the company’s 2025 FCF targets and represents attractive upside optionality for deliveries
<< Previous
Bullboard Posts
Next >>