Bullboard - Stock Discussion Forum Bombardier Inc. T.BBD.A

Alternate Symbol(s): BDRPF | T.BBD.PR.B | BDRXF | T.BBD.PR.C | T.BBD.PR.D | BOMBF | BDRAF | T.BBD.B | BDRBF

Bombardier Inc. is a Canada-based manufacturer of business aircraft with a global network of service centers. The Company is focused on designing, manufacturing and servicing business jets. The Company has a worldwide fleet of more than 5,000 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. It... see more

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TSX:BBD.A - Post Discussion

Bombardier Inc. > Desjardins : Maintain at 82$

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Post by lb1temporary on Nov 04, 2022 8:34am

Desjardins : Maintain at 82$

3Q recap—cleared for takeoff

The Desjardins Takeaway BBD reported slightly stronger-than-expected 3Q results. Management’s overall tone and messaging were very bullish. BBD continues to pay down debt (we now expect an additional US$600m in 2023 and US$500m in 2024) and improve its credit rating, which could open the company up to a bigger pool of institutional investors. We remain bullish on the short- and long-term prospects for BBD and recommend investors revisit the story. We maintain our C$82 target.

Highlights

Manufacturing segment—it will be a busy 4Q; still on track for 120+ deliveries for the year. BBD reiterated that full-year deliveries are still on track for more than 120 aircraft, with a strong output of at least 47 deliveries in 4Q. We expect revenue of US$6.6b with adjusted EBITDA margin of 13.5% in 2022.

Guidance reiterated—but management provided some interesting tidbits on 4Q, 2023 and its 2025 targets. Management stated it will most likely introduce 2023 guidance in 1Q23 and that it could update its 2025 guidance early next year as BBD is currently on pace to exceed its original targets.

BBD continues to repay debt—we expect another rating upgrade in 1Q23. Moody’s stated that a financial leverage ratio below 6.0x (using gross debt) and sustainable FCF could lead to an additional rating upgrade. Using this method of calculation, we estimate BBD will reach 6.0x in 1Q23. We expect a subsequent rating upgrade with additional interest rate savings

We see many catalysts—stock could be worth US$153 in the long term. Both Flexjet and flyExclusive have announced SPACs in the last month at rich valuations, which suggests some multiple expansion for BBD as it reduces its risk profile and continues to expand its manufacturing and servicing capacity.

Valuation

Tweaking our estimates but maintaining our target at C$82. Our target is based on an EV/EBITDA multiple of 8.25x on our 2023 EBITDA forecast (was 8.5x) of US$1,190m. We now use an exchange rate of C$1.37/US$1.

Recommendation

Maintaining Buy rating. We believe management is well on track with its key strategic initiatives to expand margins and revenue as it reduces debt.