Take a pass on Bombardier stock, Veronica Hersch says

Bombardier (Bombardier Stock Quote, Chart TSX:BBD.B) may have jumped last week on strong fourth quarter results, but as far as long-term hold stocks go, Canadian investors should be looking elsewhere, says Veronica Hersch of Arrow Capital.

“I’m not a fan but I’ve had a lot of phone calls from people telling me that the chart looks wonderful, that the stock broke out and the earnings were good,” says Hersch, senior portfolio manager for Arrow Capital, to BNN Bloomberg on Wednesday.

“But I just find that there’s got to be something better that you can own in Canada, surely,” she says.

Currently in the middle of a five-year restructuring plan, the plane and train maker saw its share price both rise and fall over the course of 2018, with the drop off precipitated in part by a troubling third quarter report delivered in November, which featured a $600-million shortfall in free cash flow and weaker outlook than expected.

But BBD’s fourth quarter, delivered last Thursday, arrived with an earnings beat and a full-year which generated a profit for the first time in five years. The company reported a Q4 profit of $55 million, which compared with a loss of $188 million a year prior. On an adjusted basis, Bombardier made five cents per share compared to a loss of two cents per share a year prior and better than the consensus expectation of two cents per share.

“2018 was a year of solid progress,” CEO Alain Bellemare said in a press release. “We continued to strengthen our business and set a strong foundation for growth. A foundation that includes a refreshed portfolio of best-in-class products, industry-leading backlogs and a more streamlined cost structure, all of which gives us a clear path to achieve our 2020 objectives.”

Bombardier’s share price is now up 37 per cent over the past week and 38 per cent year-to-date.

“The stock is beaten up and I understand that it’s cheap,” says Hersch. “I’m not a fan of value, but if you like value then probably Bombardier is an okay trade for you. If you want to trade it, please go ahead, but it’s not something I would hang onto for a long time.”