BMO analyst Fadi Chamoun raised his price target on Bombardier Inc. (BBD-B-T) to C$1.80 from C$1.35, citing progress in reducing debt and financing costs, as well as positive trends being seen in business aviation.
He upgraded his rating to “outperform” from “outperform (speculative)”.
“Debt reduction and refinancing transactions largely clear the debt maturity runway through 2023 and reduce interest costs by over $200 million on an annualized basis,” Mr. Chamoun said in a research note. “Overall, the interest cost savings are likely to be higher than targeted and realized quicker than originally anticipated, while the overhang from large near-term debt maturities is alleviated.”
Meanwhile, business aviation flight activity in the U.S. is nearly back to pre-pandemic levels and with easing border restrictions going forward, the analyst anticipates the demand momentum will continue to improve both in the U.S. and international markets.
“We expect business aviation to continue to offer wealthy travelers and corporate customers greater safety and accessibility (commercial aviation could take time to restore pre-pandemic travel schedules, particularly on international routes). With the number of available used aircraft at historical low levels, we suspect demand will begin to spill over to the new aircraft market over the coming quarters. This should support higher production rates and more robust pricing,” Mr. Chamoun said.