Post by
Tempo1 on Jul 26, 2024 8:35am
TD: Slightly Positive
Q2/24; HEADING FOR SAME STRONG 2024 DESPITE THE MOVING PARTS
THE TD COWEN INSIGHT Bombardier reported Q2/24 Adjusted EBITDA of $335 million (TD/consensus: $276/$294 million). Stronger-than-forecast results across the board (deliveries, revenue, Adjusted EBITDA, FCF), a portion due to a pull-forward of deliveries, combined with strong order activity and attractive valuation suggests to us that investors should take advantage of yesterday's negative share price reaction.
Impact: SLIGHTLY POSITIVE
We are maintaining our BUY recommendation and C$129 target. Our unchanged target reflects the shift forward of our valuation-period by one quarter and slightly higher forecast adjusted EBITDA offset by updated FX assumptions. Our updated adjusted EBITDA estimates primarily reflect the carry forward of a portion of the stronger-than-forecast Q2/24 results.
Bombardier reported a good quarter that included adjusted EBITDA, deliveries, and FCF that was stronger-than-forecast and consensus. B:B was 1.0x despite a very strong delivery quarter. The company pulled forward what we believe was a handful of deliveries to Q2/24 from Q3/24, although we believe results would still have been stronger than forecast after adjusting for this impact. Adjusted EBITDA margin was lower-than-forecast and declined 120 bps y/y which we believe was due to delivery mix and a reduced relative contribution from aftermarket services. The 1.0x b:b ratio against 34% delivery growth is impressive and suggests that the demand environment remains healthy. FCF usage is expected to follow historical trends and reverse in the H2/24 as the investments in inventory subside and deliveries improve.
There was no change to management's outlook. 2024 guidance was re-iterated and continues to imply strong revenue and earnings growth, significantly positive FCF that reflects investments in ramping-up Global production and declining financial leverage. Management is monitoring the Spirit AeroSystems Belfast situation and suggested that Bombardier could be a potential buyer if deemed prudent from a financial, risk, and supply chain perspective. Our preliminary view is that the purchase could be a net positive given the limited expected cost, Bombardier's financial resources, experience with the asset, and risk reducing implications.