The right time to buy Bombardier is never, this investor says

Canada’s Bombardier (Bombardier Stock Quote, Chart, News TSX:BBD.B) has made some big moves of late to try to turn the ship around but with the stock still in the dumps, should investors wait a little longer before jumping on board?

In a word, no, says Norman Levine of Portfolio Management Corporation, who thinks betting on Bombardier’s resurrection is dead money.

Montreal-based plane and train-maker Bombardier announced on Monday a new flight record for its Global 7500 business aircraft, which recently made a non-stop trip from Sydney, Australia, to Detroit in the US.

“Since entry-into-service, the Global 7500 aircraft continues to go above and beyond expectations, flying farther and farther, setting new benchmarks for exceptional performance and comfort,” said Peter Likoray, Senior Vice President, Worldwide Sales and Marketing for Bombardier, in a press release.

(Bombardier) is a poorly run company and were it not for its enormous subsidies and special treatment from the federal government it probably wouldn’t exist anymore. I can’t come up with any reason to own it…”

Bombardier hopes that its focus on business jets and the shedding of its regional jet program, sold to Mitsubishi Aircraft this past June, will streamline the company and bring it better profit margins, all part of the company’s five-year turnaround plan which is now in the late stages.

And while Bombardier’s share price did well over 2017 and the first half of 2018, more than doubling in value, the story has been less positive since, with BBD now down about 70 per cent since mid-2017 and currently down 22 per cent for 2019, trading at $1.60 per share as of Monday’s close.

The dismal picture isn’t likely to get better, says Levine, managing director at Portfolio Management, who thinks that Bombardier has a bad track record.

“Should you wait? I think you should wait forever before buying this stock,” says Levine, in conversation with BNN Bloomberg on Monday. “This is a stock that I’ve hated almost forever.”

“It is a poorly run company and were it not for its enormous subsidies and special treatment from the federal government it probably wouldn’t exist anymore. I can’t come up with any reason to own it,” he says.

“I’m not right on everything but this has been a stock that other than for very nimble short-term traders should be avoided,” says Levine.

Last month, Bombardier won Canadian regulatory approval for two new large-cabin luxury business jets, the Global 5500 and Global 6500, on which it hopes to start deliveries by the end of the year.

“What you’re seeing now is us transitioning into full execution mode after a very intense series of investments,” said Bombardier spokesman Mark Masluch, to the Globe and Mail. “We invested a lot in the 7500 in terms of infrastructure, design, people, facilities. A lot of that has [been a] benefit in bringing the 5500 and 6500 to market faster.”

Bombardier last reported its quarterly earnings on August 1, where it posted revenue of $4.31 billion in its second quarter versus $4.26 billion a year earlier and a net loss of $36 million or four cents per share. Analysts had called for a profit of $70 million or two cents per share. With its quarterly report, management also lowered its 2019 guidance from earnings between $1.50 billion and $1.65 billion to between $1.20 billion and $1.30 billion.