RE:More TDWow. Here we go, out from negative equity soon, according to the TD Cowen article below. The last paragraph.
I think closer to 2026 would be more realistic.The potential equity value/share is C$25-C$95 according to the article.
"We estimate that the revenue from these businesses could provide incremental upside potential equity value/share of C $21-C$95 relative to our 2025 forecast." This is the place I was looking for, for the company to land. The positives are just too many to predict going forward. This company's growth is on an upward trajectory going forward in the years to come.
"We estimate that the company will continue to drive leverage lower to 1.8x by the end of 2025 and achieve an investment grade balance sheet by 2026." There is even mention by TD Cowen above, of the company of reaching Investment Grade soon. I think 2026 is too soon. I would expect the first half of 2027 to be more realist, given the Rating Agencies delays.
retiredcf wrote: Have a $130.00 target. GLTA
BEST IDEAS 2025: GROWTH, DELEVERAGING & RE-RATING PRESENTS OPPORTUNITY
THE TD COWEN INSIGHT
We are refreshing our Canada Best Idea pick which was originally published on Sept. 30, 2024 (link). Our thesis is unchanged, and we are simply updating the Canada Best Ideas note with our most up-to-date estimates. We believe a Bombardier re-rating is warranted given financial progress, 2-3 year forecast growth, deleveraging, revenue diversification, and returning capital to shareholders.
Summary Of Our Thesis
We believe Bombardier is transitioning from a turnaround story to a multiple expansion story and that its large EBITDA valuation discount (3.6x) relative to comps will decline as earnings increase, FCF power expands, balance sheet leverage declines, capital is returned to shareholders, and the equity market increasingly appreciates the declining risk profile.
Since 2020, the company has increased revenue at a 13% CAGR through 2023 based on 11% Aircraft Manufacturing growth and 21% Aftermarket growth. Adjusted EBITDA has increased at an 84% CAGR and margin has expanded by more than 1,100 bps to a historically high 15.3%. We believe that volume, contract pricing, mix and aftermarket revenue growth will drive another 300 bps of adj EBITDA margin expansion leading to growth in EBITDA and EPS of 12% and 14% CAGR's, respectively from 2023 through 2026.
Following FCF usage of $1.9 billion in 2020, the company is on track to generate $1.2 billion of cumulative FCF from 2022-2024. We forecast cumulative FCF from 2024 through 2026 of $2.2 billion.
Growth in FCF has helped to drive down net debt to adjusted EBITDA to 3.6x from over 10x. We estimate that the company will continue to drive leverage lower to 1.8x by the end of 2025 and achieve an investment grade balance sheet by 2026.
We forecast strong aftermarket services growth while the company is targeting a 2x-3x increase in defense revenue by the end of the decade. We believe these businesses should attract higher multiples and as the market is able to observe growth in these sources of incremental EBITDA, we believe it will provide another reason for long-term multiple expansion.
General: The data above (excl. 12-month dividend estimate and float shares) reflects FactSet data. Refer to our comp table for TD's calculation.
Management believes the company has the potential to generate $1.0-1.5 billion of defense revenue (10-17% CAGR relative to 2023) and $2.8-3.9 billion of aftermarket revenue (5.9-11.9% CAGR relative to TD's 2024 forecast) by 2030. We estimate that the revenue from these businesses could provide incremental upside potential equity value/share of C $21-C$95 relative to our 2025 forecast.