Opinions
Lorne Steinberg
Bombardier Inc (B)
BBD.B-T
DON'T BUY
Sep 04, 2018
Stock price when the opinion was issued
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The question was on Bombardier being a good company for manufacturing military equipment and are there others in this field in Canada. He is not aware of other companies in Canada and although Bombardier does have a defense component it would be affected by tariffs.
Very focused on a single segment, private aviation. Increasingly, more revenues are coming from after-market parts and service. Bigger addressable market opportunities with the bigger installed base of its planes.
Growing opportunity in small, but high-margin, segment where they adapt a plane's chassis to reconnaissance planes of NATO allies. Deleveraging, big free cashflow. No dividend.
Continues to be an accretive growth story with deleveraging. Tariff noise was unexpected. Still, showing solid execution. Forward 2025 guidance appears achievable. Impressive ability to improve margins. Not expensive at 11x PE for 2026, growing at 17%. Not for the faint of heart.
Demand is off the charts. Bump in the road right now is about tariffs on parts, steel, aluminum. Much different business than before. Generating lots of free cash, balance sheet improving rapidly. Manufacturing is a tough business, and he'd rather a segment with more certainty with a stock like TDG.
Gaining altitude. Technological leadership in medium- and long-range aircraft. Order book looks pretty robust, production slate is full. After-market parts and service provide stable revenue. Airplanes can be repurposed for military use, and Canada's recently upped defense spending commitments.
Long and complex supply chain, and tariffs are still a wild card. So not out of the woods yet. Stock breaking out to fresh all-time highs speaks to its resilience and to worst-case tariff scenario probably not materializing.
Great breakout, with a parabolic move. You never know when the parabolic move will end, but you do know that it will and pull back. The pullback will land well above the last peak. Overall, it's on a tear. For new $$, wait to see it pull back, as now it's probably overbought.
Pleased with performance. Continues to like. Runup this month due to contract to deliver 50 aircraft. Pure play on private aviation. A generation or half a generation ahead of competitors in medium- and long-range aircraft. It's the best on a range of metrics, and its money-is-no-object customers don't comparison shop. After-market parts and services business. Chance to win defense contracts.
Enjoying a moment in the sun after 20 years under a dark cloud. Most investors haven't yet realized that, so more upside.
Still has way too much debt, as they have had for too many years. He likes the new management changes. The CEO has been doing a good job. Aircraft is in a good place now. They have raised some cash recently, by a building sale or a sale-and-leaseback. This is probably a good time in the cycle for Bombardier, but the only way this company can create long-term value is to figure out how to get their debt down and generate free cash flow. If he owned the stock, he MIGHT hold it, especially because of rumours that they might sell a division (transportation), which could create shareholder value.