Stay away from Bombardier’s stock, this fund manager says

When is a bargain not a bargain?

Bombardier (Bombardier Stock Quote, Chart TSX:BBD-B) stock may have lost half of its value over the past nine months but don’t go thinking that now’s the time to buy. So says Christine Poole, CEO of GlobeInvest Capital Management, who claims that there are other names in the aerospace sector that you should be looking at.

“They’ve sold off a lot of their businesses. They still have their transportation and trains side of the business and their business jet, as the C Series has basically been taken over by Airbus,” Poole told BNN Bloomberg Wednesday. “Now, it’s really going to be reliant on their business jet and we’ll have to see how some of their new platforms play out.”

Partway through a major restructuring, Montreal-based Bombardier last reported earnings on February 14, where the company posted a fourth-quarter profit of $55 million which beat analysts’ expectations and came well ahead of the $188-million loss a year prior. Q4 revenues fell by ten per cent to $2.16 billion, while for its fiscal 2018, Bombardier turned a profit for the first time in five years. (All figures in US dollars unless noted otherwise.)

Breaking down the numbers, Bombardier’s train division took in $8.9 billion in 2018 while its business jet division grew to $4.99 billion. Management says that its Global 7500 — the world’s largest business jet, which last month broke the record for travel time between Los Angeles and New York City at three hours and 54 minutes — will continue to contribute to a larger chunk of its revenue, aiming for a 40 per cent increase to $8.5 billion in revenue by 2020.

Bombardier’s share price hit a seven-year high of $5.58 last July but promptly started dropping off, hitting a low of $1.59 by mid-November before settling into the high-$2.00 range where it currently trades.

Poole says debt is still a major concern for Bombardier.

“The company is still fairly levered. So, I’m not looking to get in on this stock, especially in the aerospace sector where we have other names that we think are better positioned,” Poole says.

“To me, [the stock] is fairly valued if not over-valued. They’ve had to divest a lot of assets to adjust the balance sheet issue,” she says.