Bombardier reported solid financial results in the second quarter, said Desjardins Securities analyst Benoit Poirier. (Image: courtesy)
What to do with Bombardier, Cascades and Lion Electric stocks Here are some analyst recommendations that prices are likely to move in the near future. Note: The author may have a completely different opinion from the one expressed.
Bombardier (BBD.B, $25.74): The Desjardins analyst is raising its price target
The business jet maker reported solid financial results in the second quarter, said Desjardins Securities analyst Benoit Poirier.
He believes management’s full-year 2022 guidance is conservative and could be raised again as management delivers on what it has promised to improve the company’s profit margins.
“We remain bullish on the near- and long-term prospects for Bombardier and encourage investors to reconsider their views on the stock,” he wrote. Bombardier stock has fallen sharply since the stock’s consolidation before rebounding just over 10% on Thursday following the release of financial results.
Benoit Poirier points out that the increasing demand is closely linked to commercial aviation problems, which are pushing some customers to opt for business jets.
In its earnings release, Bombardier reported a book-to-unit ratio of 1.8 for the second quarter. The order book grew 37% to $14.7 billion in a year. “CFO Bart Demosky said in June that even if the ratio were 1, the company would still be able to generate positive cash flow,” the analyst recalls.
Bombardier pleasantly surprised analysts by generating US$341 million (M$) in free cash flow for the quarter, while Desjardins analyst had forecast a decline of US$147 million (analyst consensus at -US$78 million).
The company is forecasting cash flow of over $515 million for 2022, down from the previous forecast of “over $50 million.” The analyst is expecting $759 million while the analyst consensus is $196 million.
Benoit Poirier also points out that its after-sales services division generated revenue of $359 million in the second quarter, up 22% year over year and posting pre-pandemic revenue for the fourth straight quarter surpasses
Thanks to these good financial results, the analyst predicts that the company will be able to repay between $750 million and $1 billion in debt over the next nine months.
The analyst keeps a Buy rating on the stock and slightly raises the one-year price target to $82 from $80, reflecting an 8.5x 2023 Enterprise Value/Earnings Before Interest, Taxes, and Amortization (EV/EBITDA) and forecasts EBITDA of $1.19 billion next year.
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