Byron Capital analyst Tom Astle says the company’s commercial aircraft segment gets a ton of press and attention, but actually contributes very little to the stock’s valuation. The Byron analyst says trains remain the company’s largest contributor, but the company’s Business Jets division represents the most leverage to a recovering economy.The name Bombardier, in the public markets, used to be synonymous with excitement.
Shares of the aerospace and transportation giant, for instance, more than doubled between the summer of 1999 and 2000. But somewhere along the line, a decade ago to be precise, Bombardier became your dad’s stock. That move during the dot-com era was the last before the company’s stock tumbled, then flattened to approximately where it is today.
Today, Bombardier is one of the most widely held Canadian issues in the world, and 10% moves in its share price are scrutinized and debated by portfolio managers from Basel to Boston, who like its predictable business and dividend payouts.
Byron Capital analyst Tom Astle, however, says Bombardier is a misunderstood name. Astle says the company’s commercial aircraft segment gets a ton of press and attention, but actually contributes very little to the stock’s valuation. The Byron analyst says trains remain the company’s largest contributor, but the company’s Business Jets division represents the most leverage to a recovering economy.
In June, Bombardier announced that, just over one year after the largest business aircraft sale in its history, it had surpassed that record with a firm order from NetJets Inc. for 100 Challenger business jets with options for an additional 175 aircraft.
Astle will travel to China next week to see several Bombardier facilities , including Bombardier Sifang Transport, which produces the high speed trains for China, and Shenyang Aerospace Company (SAC), which manufactures the C-Series fuselages. While Asia represents a real growth opportunity for Bombardier, Astle isn’t suggesting the company’s stock will once again take flight. He does, however, think the Quebec-based company is a favourably priced name for longer-term investors. In a research update to clients Wednesday, Astle reiterated his BUY rating and $4.50 target price on Bombardier.
One area that makes Astle nervous is Bombardier’s C-Series. He feels the company’s timeline is too aggressive, offering that he would be very surprised wheels leave the ground this year as scheduled, and even more surprised if the company can get everything certified for commercial deliveries by the end of 2013. But Astle feels this is already priced into the company’s share price.
At press time, shares of Bombardier on the TSX were up .3% to $3.69.