With Bombardier (Bombardier Stock Quote, Chart, News TSX:BBD.B) putting the finishing touches on its multi-year transformation —and with its share price in the gutter— the newer and leaner company might look attractive to some investors seeking a potentially cheap pickup.
But with the wealth of options on display in today’s market, portfolio manager Brian Acker says why bother taking a flier on a perpetual loser like Bombardier?
Montreal-based Bombardier reported its first quarter numbers last week, showing a $200-million loss for the Q1 and a five-per-cent hike in revenue to $3.7 billion. The COVID-19 crisis took its toll on the plane and train manufacturer, likely to the count of between $600 and $800 million, according to the company, a consequence of being unable to deliver aircraft following government-imposed travel restrictions, production shutdowns and lower than expected order intake.
“Bombardier has begun the gradual resumption of manufacturing operations at both Aviation and Transportation necessary to deliver on our strong rail backlog and to continue the production ramp-up of the Global 7500,” said newly-anointed CEO Éric Martel. “As we bring our operations back on-line, we remain focused on protecting our employees, supporting our customers during this difficult period and taking the actions necessary to preserve the Company’s long-term future.”
Martel’s job won’t be an easy one, as Bombardier tries to remake itself in the wake of consistent losses and mounting debts in its business segments. The plan so far has been a drastic one: to shed itself of money-losing businesses, even if they’ve been central to the company’s identity for decades.
The first major move was the offloading of its praised C-Series jet business to Airbus a couple of years ago, followed more recently by the sale of Bombardier’s train business to Alstom as well as the unloading of its regional jet program to Mitsubishi Heavy Industries, with both deals still to be finalized.
But the road ahead may not be smooth, even in the company’s lean and mean guise, since the economic slowdown resulting from COVID-19 will surely put a damper on the market for business-class jets, Bombardier’s eggs-in-one-basket business going forward.
Still, even if you have faith that Bombardier can make a go of it —and if you’re attracted by the share price, which is now below $0.50— Brian Acker of Acker Finley says BBD is just not worth your money.
“To me it’s been bankrupt for years,” says Acker, speaking on BNN Bloomberg on Friday. “The only thing hanging on is this federal government guarantee, but with so many great opportunities out there —and hopefully we have another pullback we did in March— just get rid of this position and think quality.”
“We don’t know how long [COVID-19] is going to last. It could last year for two years so you want quality, you want US names and that’s where your portfolio should be,” he said.
“Stop playing with these things.”