Bombardier will benefit from higher defense spending, this analyst says

With Canadian military spending set to reach levels not seen since the end of the Second World War, one analyst thinks the move is a clear boost to Bombardier (Bombardier Stock Quote, Chart, News, Analysts, Financials TSX:BBD.B).

Prime Minister Mark Carney, following a NATO summit in the Netherlands, confirmed that Canada would join other countries in raising defense spending to five per cent of its GDP within a decade.

“We are protecting Canadians against new threats. I wish we didn’t have to… but we do have to and it is our core responsibility as government,” Carney said.

As reported by the Globe and Mail, National Bank Financial analyst Cameron Doerksen thinks Bombardier will be a beneficiary of this spending and in a research update to clients June 26th he maintained his “Outperform” rating and price target of $115.00 on BBD.B. The analyst explained his reasoning.

“Bombardier’s Defence segment revenue today is modest, but the company has aspirations to grow the business to US$1.0-1.5-billion by 2030,” he wrote. “As for specific new opportunities for Bombardier, Canada is likely to move forward with a procurement for new Airborne Early Warning & Control planes (AEW&C) with the SAAB GlobalEye or the L3Harris solutions (both based on the Bombardier Global 6000/6500 platform) likely be the chosen aircraft, in our view. In addition, given its position is one of Canada’s leading aerospace companies with extensive engineering and program management capabilities, we could also see Bombardier expanding its range of services for the Canadian military into areas such has aftermarket support.”