Bombardier has seen a significant rally over the past year, raising questions for investors about whether it’s the right moment to buy or if it’s better to wait for a dip. With shares approaching $165, the timing could be crucial for those considering a position in this aerospace giant.
What happened
Over the last 12 months, Bombardier has experienced a remarkable turnaround, transforming from a struggling aerospace manufacturer into a more profitable and diversified company. Its key achievements include expanding its order backlog, improving margins, and ramping up its services division. Recently, the company announced quarterly revenues of $2 billion, which, although down 8% year-over-year, were accompanied by a 16% rise in services revenue to $590 million. Even more impressive was the jump in net income to $193 million from just $19 million in the previous year, signaling a clear improvement in profitability and operational efficiency.
Furthermore, Bombardier’s EBITDA reached $297 million, and its earnings per share hit $1.87, reflecting strong leverage from higher service activity and better cost management. The company’s order book also surged to $16.1 billion—a level not seen in over a decade—thanks to a massive aircraft order consisting of 50 units plus 70 options, which boosted its book-to-bill ratio to 2.3. This demand underscores its continued relevance in the private jet market, especially with flagship models like the Global and Challenger jets, and signals a positive outlook for the aerospace heavyweight.
By the numbers
- Stock Price: Near $165
- Year-to-date share increase: +85%
- Revenue: $2 billion (down 8% YoY)
- Services revenue: $590 million (+16%)
- Net income: $193 million (up from $19 million)
- EBITDA: $297 million
- EPS: $1.87
- Order backlog: $16.1 billion
- Debt: $5.7 billion
- Liquidity: $1.2 billion
- Shares outstanding: Not specified
- Key tickers: TSX:BBD.B
Context
Bombardier’s recent success is rooted in its strategic shift away from struggling commercial aircraft and focus on high-margin business jets, defense, and services. Its transformation comes amid industry-wide recovery hopes and increased demand for private jets as global wealth concentrates. The aerospace sector, however, remains highly cyclical and sensitive to economic downturns and geopolitical uncertainties. The company’s high debt load of $5.7 billion poses a risk, although recent refinancing efforts and a credit upgrade have helped improve its financial position. Additionally, Bombardier’s diversified portfolio—including defense contracts and expanding services—provides some cushion against volatile aircraft sales.
Industry dynamics favor premium aircraft amid rising global wealth, but supply chain disruptions, delivery delays, or economic hiccups could hamper growth. The company’s ability to execute on its ambitious order book and new product launches, like the upcoming Global 8000, will be key to sustaining its growth momentum.
What’s next
Looking ahead, Bombardier’s near-term catalysts include fulfilling its large order backlog, launching the Global 8000, and expanding its services division. Management’s guidance suggests that deliveries in the second half of the year should improve cash flow, though free cash flow remains negative at $164 million for the latest quarter. Investors should watch for updates on delivery schedules, new contracts (particularly in defense), and any shifts in global economic conditions that could impact high-net-worth individual spending on private jets.
Risks include potential delays in aircraft deliveries, economic slowdown, or increased competition from other aerospace manufacturers. The stock’s high beta indicates it can be quite volatile, often swinging with broader market sentiment. Investors should consider whether current valuations—about 27 times trailing earnings and 19 times forward—are justified given the cyclical nature of the industry and Bombardier’s high leverage.
In the medium term, if Bombardier continues its growth trajectory and manages its debt effectively, the stock could offer substantial upside. However, patience may be required, and a cautious approach—such as initiating a partial position—might help manage risk while still capturing potential gains.
Bottom line:
Bombardier’s recent performance signals a company on the rise, but its high valuation and industry risks advise a balanced approach—buying on dips could be a smarter move for long-term investors.
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Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website.
