Desjardins Securities raising BBD target to $145 Desjardins Securities analyst Benoit Poirier sees Thursday’s 6.8-per-cent drop in Bombardier Inc.’s (
) share price as a buying opportunity.
“Although some investors were disappointed by BBD’s slight miss (EBITDA and FCF), on the call management quantified certain one-time items (SBC, supply chain issues and impact from bondholder settlement),” he said. “We remain confident in BBD’s ability to deliver significant FCF over the coming years; however, we are building some working capital conservatism into our numbers for 2025 due to the supply chain issues across the A&D industry.”
While the Montreal-based company reiterated its 2024 guidance reiterated, Mr. Poirier emphasized its supply chain “remains challenged” in a research note titled Clear skies but cloudy supply chains.
“While BBD’s US$900-million-plus 2025 FCF target assumes neutral working capital, we now assume an investment of US$197-million, translating into a lower FCF forecast of US$757-milion,” he said. “Nevertheless, we expect the investment to be temporary and believe BBD could achieve close to US$1.0-billion of FCF in 2026 as supply chain issues dissipate. If BBD keeps deliveries relatively flat at 150/ year, this working capital investment should reverse in the future.”
“Adjusted net debt/TTM [trailing 12-month] EBITDA came in at 3.5 times, in line with last quarter and slightly better than our forecast of 3.6 times. Deleveraging is going according to plan, with the company getting closer to its leverage guidance of 2.0–2.5 times by 2025 (which we believe is on the conservative side). With a strong FCF print expected in 4Q, we expect the company to finish the year at 2.9 times and 1.9 times in 2025, slightly better than management’s internal target. While some investments in derivatives and/or defence could be required (within the capex envelope of US$200–300-million), management was vocal that it will strongly consider distributions to shareholders (most likely through share buybacks) or could decide to further pay down debt once it reaches its target.”
After raising his revenue and earnings forecast for fiscal 2025, Mr. Poirier increased his target for Bombardier shares to $145 from $143, keeping a “buy” recommendation. The average is $117.64.
“We believe the current share price provides an interesting entry point for long-term investors,” he concluded.
Elsewhere, CIBC’s Kevin Chiang cut his target to $131 from $134 with an “outperformer” rating.