NBF: Target raisedQ3 preview; target raised as valuation remains attractive
Q3 deliveries look solid
Based on data sources we track, we estimate that Bombardier delivered 31 planes in Q3 versus our prior forecast for 29 deliveries with the delivery mix more skewed to larger jets than our prior forecast. While our data has generally proven to be fairly accurate, it is often the case that our estimates are off by a handful of planes, but we nevertheless remain confident that the company can meet its full-year aircraft delivery guidance of 150-155 jets.
End markets remain supportive
According to business aviation data provider WingX, global business jet flying activity in the first nine months of the year was down 1.4% compared to the same period a year ago but up 29.9% versus 2019. Interestingly, WingX notes that Bombardier is one of the few OEMs that is seeing its business jets' flying activity up y/y so far in 2024 with total flights up 3.1% (and up 33.4% versus 2019).
Valuation remains attractive
Bombardier shares have enjoyed a very strong performance up more than 100% so far in 2024 (versus TSX up ~15%), but we still see a compelling argument for valuation multiple upside. Based on the company's 2025 target of just over $1.6 billion in EBITDA, the stock is trading at just 7.8x EV/EBITDA, which is a discount to the airframer OEM peer group average of ~10x based on 2025 forecasts (aerospace supplier peers trade at 12x+).
Maintain OP;
target raised to C$128.00 from C$117.00 We previously valued Bombardier using a 7.5x EV/EBITDA multiple applied to our 2025 EBITDA forecast (which sits at $1.566 billion versus management’s target of $1.625 billion). With end market dynamics remaining positive and our growing confidence that Bombardier can generate solid FCF over a multiyear period, we are comfortable increasing our valuation multiple to 8.0x. As a result, our target moves to C$128.00 from C$117.00 previously.