Bombardier Inc. It expects sales and profits to grow next year as demand for private jets remains resilient. (The Canadian Press/Paul Chiasson)
Bombardier Inc. (BBD-B.TO) expects sales and profits to grow next year as demand for private jets remains resilient despite concerns of an economic slowdown and the company expands into the defense sector.
The Montreal-based company, which reported fourth-quarter and annual earnings on Thursday, unveiled a bullish forecast for the upcoming fiscal year. It expects to deliver 138 aircraft from 123 deliveries this year, and total sales to reach at least US$7.6 billion, an increase from US$6.9 billion. Bombardier expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to rise 21 percent from last year to US$1.15 billion. In 2020, the company reported adjusted EBITDA of US$200 million.
“The guidance we’re publishing this year clearly shows that we’re ahead of our plan,” Chief Executive Officer Eric Martel said in an interview. Yahoo Finance Canada.
“The market has been resilient despite the economic situation across the globe. We can still see movement and orders (happening), but at a more reasonable pace than 12 months ago.
While the COVID-19 pandemic brought the commercial airline industry to a halt, it was a boon for the private jet market in which Bombardier now operates exclusively. Martel said the pandemic was “an accelerant” for the aircraft maker and a turning point for the once beleaguered company.
“We started out focusing on private aviation, and clearly the momentum was very helpful,” he said.
It was not long ago that Bombardier was on the verge of bankruptcy. After the company exited commercial aviation and sold its train business, the focus shifted to private jets.
Bombardier stock has declined over the past year. While shares of the aircraft maker fell nearly 12 percent on Thursday, the stock was still up 14 percent this year.
National Bank analyst Cameron Dorxen raised the price target for Bombardier’s stock from $67 per share to $72 per share, but lowered the rating to “sector perform” largely due to the stock’s “tremendous run”.
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“With a solid backlog, positive margin trends and decreasing leverage, we remain confident that financial results will continue to improve over the next several years,” Dirksen wrote in a note to clients.
“However, we feel the stock is due for stagnation in its upward momentum and would prefer to buy the stock on a pullback.”
Doerksen also noted that business jet market sentiment may soften, with pre-owned jet inventory higher than expected in 2022 and business aircraft utilization expected to decrease by 1 percent.
Martel, who took over as CEO of Bombardier in April 2020, said business jet demand had slowed 12 months ago, but the market remains strong despite the economic downturn. Pointing to the Great Recession that began in 2008, he said it is a trend that has happened before. At the time, Bombardier saw its private jet deliveries increase by 20 percent on an annual basis.
Bombardier also sees significant opportunity in selling its lineup of business jets to the defense sector to be used for surveillance, communications and other purposes. While the company hasn’t focused its sales efforts on the defense industry (according to Martell, it sells about 10 jets per year in the sector) this represents a growth opportunity.
“We’re going to build a defense business,” Martel said, adding that it could represent a billion dollars a year in revenue for Bombardier.
“The opportunity is so significant for us that we have an amazing platform that is renowned across the globe for its reliability, performance and capability… The defense sector does not need the big airplanes that they used to have and which are expensive Operation. There are several reasons why this makes sense.
In December, Bombardier issued a statement on behalf of Martel expressing concern about the Canadian government’s possible plan to award a sole-source contract to Boeing for the new reconnaissance jets. Media reports say Canada is considering a multi-billion dollar purchase of a dozen P-8 Poseidon aircraft from Boeing.
“It should be a normal procurement process with competition to get the contract,” Martel said.
The company, which reports its financial results in US dollars, said total sales in 2022 are expected to reach $6.9 billion, up from $6 billion in 2021. A loss of $326 million, or $3.66 per share, last year.
Eliza Siekierska is a senior reporter at Yahoo Finance Canada. follow him on twitter @alicjawithaj,
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Source: ca.finance.yahoo.com
