There may be upside to Canadian plane and train maker Bombardier (Bombardier Stock Quote, Chart, News TSX:BBD.B) but you might not like how this story turns out in the long run.
That’s the message from portfolio manager Rick Stuchberry of Wellington-Altus Private Wealth, who says buy BBD for a trade but that’s it.
Bombardier’s long and storied history in Canadian manufacturing has had its twists and turns over the years, with the company moving on from snowmobiles to rail equipment by the 1970s and then aerospace by the 1980s.
But both rail and jets have been sold off recently in effort to deal with the company’s mounting debt.
Bombardier launched its vaunted C Series aircraft in 2016 but just two years later pushed it off to Airbus, while earlier this year Alstom agreed to buy Bombardier’s rail division. The company’s regional jet program was sold last year to Mitsubishi Heavy Industries. What’s to be left after the fire sale is Bombardier’s business jet division, a fraction of its operations just a few years ago.
Stuchberry says the future of the company is very much up in the air, leaving it a poor choice for investors looking for quality goods.
“I think on Bombardier, the way we would do it is, it's a trading situation,” says Stuchberry, in conversation with BNN Bloomberg on Tuesday. “I don't think it's investment grade anymore.”
“There are too many things have gone upside-down in there. You got the rail division, which has sort of spun off. I think the Caisse du dépôt owns part of that, you've got the jet division, the CRJ, and it's gone to the Europeans, and the business jet side is good,” he said.
Bombardier’s chart looks awful by almost any account, with the stock now down 92 per cent over the past two years. For 2020 alone, BBD is down 76 per cent.
“If you want to take a trade in it, then great, but there are so many balls in the air in this company, the minute they put a new management team in we just don't know yet,” said Stuchberry. “It's [below] $1.00 now and the market is telling you what it thinks, and I wouldn't push against the grain on this one.”
Earlier this month, Bombardier management postponed its annual general meeting indefinitely due to the current COVID-19 environment and its social distancing regulations. BBD’s first quarter financials are due for release on May 7.
Recently, the company said that some of its operations are being resumed after closures due to COVID-19. Bombardier says its business jets program will have some workers back at its Toronto plant by April 27, while its Quebec facilities may take longer to start up again. Bombardier says some of its operations in the UK along with a plant in Bruges.
Bombardier had furloughed 12,400 Canadian employees at the end of March in its plane and rail production.