Bombardier’s opportunity in Russia is large and long term, says Arment

Peter Arment, Senior Research Analyst at Sterne Agee was on BNN’s “Business Day” today to talk about the deal Bombardier announced this morning.

Bombardier has signed a deal with Rostekhnologii, a state corporation controlled by the Russian Federation, for fifty of its Q400 NextGen aircraft. The company says the order will also provide them with the opportunity to place an additional fifty. If the total value of the contract is realized, it would be worth about $3.39-billion. As part of the deal, Bombardier’s will set up a Q400 NextGen final assembly line in Russia.

Arment says building a local presence in Russia will be a key for Bombardier, and this arrangement signals a good start. He says that while it is too early to estimate a bottom line impact, the long-term opportunity for Bombardier in Russia is significant, and could mean decades worth of business.

Arment, whose firm has a top pick rating on Bombardier competitor Boeing, says the deal is part of an overall industry trend that is seeing hot markets for smaller planes.

“The narrow body market continues to be very healthy, just given what we have seen from the new aircraft developments from both Boeing and Airbus,” he says. “They’re really trying to serve their existing customer base, which is a little different from Bombardier’s efforts on the C-Series, which is trying to fill that niche which is right under the 737.”

On August 1st, Bombardier reported its Q2, 2013 financials. The company earned (U.S.) $180-million on revenue of $4.4-billion, up from $4.1-billion in the same period a year prior. The company said its backlog of $65.5-billion as at June 30th was a record.

At press time, shares of Bombardier on the TSX were up 2.8% to $4.70.

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