Post by
lb1temporary on Aug 03, 2022 9:07am
Nat bank : The july 19 report summary
Note from LB1: Some has posted the conclusion of this report but we didn't read it. A few days late but it is still interesting. Full of positive points.
Target lowered, but maintain Outperform as market sentiment looks excessively negative.
Q2/22 preview
Biz jet end markets remain healthy
Business jet flying activity is typically a leading indicator of new jet order activity and a concurrent indicator of aftermarket activity. According to WINGX, business jet flights were up 20% in the first half of 2022 and 7% y/y in June in North America, with flights in Europe up 38% y/y in H1 2022 and up 21% y/y in June. In the last four quarters, Bombardier’s backlog has shown very strong growth from $10.4 billion in Q1/21 to $13.5 billion in Q1/22 (now at over 2x annual revenue).
FCF looks set to exceed guidance
We believe management’s 2022 guidance for $50+ million in free cash flow will be exceeded. We note that in June, Bombardier announced that it would pay down an additional $350 million in debt. We believe this points to cash performance coming in better than expected in Q2. Leverage remains high, but a recent credit upgrade by Moody's points to an improving balance sheet.
Market much different today than 2008-09
While there are legitimate concerns about a wider economic slowdown, we note that business aviation is in a significantly better position today than was the case prior to the last major industry slowdown in 2008-09. In 2008, industry orders and deliveries were in a speculative bubble and used inventory for sale stood at 16.6% of the fleet. Bombardier production in 2022 remains at trough-like levels and industry used inventory for sale is sitting at only ~3% of the fleet.
Target lowered, but plenty of potential upside
We keep our Outperform rating on Bombardier but have lowered our target to $46.00 from $65.00 as we apply a more conservative target EV/ EBITDA multiple (7.0x versus 8.5x) to our 2025 estimates. Even using more conservative parameters, our new target is ~107% higher than the current share price, so we feel that the market is excessively negative on the stock noting that Bombardier has met or exceeded its financial targets over the past year or more
Comment by
Skyisthelimite on Aug 03, 2022 9:18am
Exactly... 46$...with a lowered multiple...we are at 22$...get ready my friends ...
Comment by
Shamhorish on Aug 03, 2022 9:34am
lbtemp, thank you, as mentioned "so we feel that the market is excessively negative on the stock noting that Bombardier has met or exceeded its financial targets over the past year or more" yes, and it is strange that after bbd had a few good positive quarters, paying down debts, upgraded credit rating and the market is excessively negative on bbd, sad story