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Bombardier Inc Class B (OTCMKTS:BDRBF) Out Of The Woods Yet?

Bombardier Inc Class B (OTCMKTS:BDRBF) Out Of The Woods Yet?
Written by
Jim Bloom
Published on
February 19, 2019
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Just recently, Bombardier Inc Class B (OTCMKTS:BDRBF) went through what was the biggest sell-off of its stock since 2015, due to a negative cash flow outlook for the firm.A few months later, and the stock seems to be finding its feet. In a recent Reuter’s analysis of the Canadian main stock index, the company was the largest percentage gainer on the TSX. In this piece, we analyze the cause of the rise in the firm’s share value and the expectations for the company in the near future.First, take a look at the stock’s price movement: BDRBF Daily Chart

Company Overview

Bombardier, Inc. was established as far back as June 1902, with its head office in Montreal, Canada.The company in the business of manufacturing major transport vessels such as trains and planes. The firm is split into several divisions, which include Engineering Services and Aerostructures, Business Aircraft, Commercial Aircrafts, and Transportation.The Aerostructures and Engineering Services unit develops and produces major aircraft essential parts such as wings, fuselages, engine nacelles while it also delivers aftermarket component repair and overhauls along with other engineering services for both internal and external clients.The Business Aircraft unit designs manufactures and provides aftermarket support for different business jet types, spanning from the light to large categories. The Commercial Aircraft segment designs and manufactures a number of commercial aircraft.The Transportation segment provides product ranges and services to the rail industry while covering the entire spectrum of rail solutions including e-mobility, signaling, system integration, complete trains and subsystems, and other services.

Recent Developments

In a recent publication by Bloomberg, the main cause for Bombardier Inc’s incredible rise in value was the better than expected for cash flow revelation where it reaffirmed its 2019 projections, improving investor confidence after the huge disaster experienced just three months ago.According to the announcement, free cash flow was as high as $1.04 billion in the fourth quarter by BDBRF. This was well in excess of the mean estimate of $890 million computed by Bloomberg. The manufacturer of trains and planes also reaffirmed its financial targets for 2019, which includes sales of no less than $18 billion as well as a break-even free cash flow of plus or minus $250 million.

An analyst from National Bank Financial in Montreal was quoted to has said: “The company’s cash flow performance is vastly improving, pretax profit has essentially doubled, and the risk around key program development has largely been retired over the past four years.”

Since the report was released, Bombardier’s Class B shares have risen by over 20% on the exchange, its biggest gain since November 2018. There is hope that the company may be able to go as high as C$3.19, its value as of November 7, the day before the release of its now infamous third quarter report. This will serve to spur on the attempts of the CEO to ensure investors of the viability of his five-year turnaround plan.It is also expected that this will help the company refinance some of its due debts in the next year. Also encouraging is the fact that conditions on the bond market have improved.Further improvement in the stock’s outlook expected as the fourth quarter is characteristically the firm’s best time for cash-flow generation as this is the period when most deliveries of plane and rail-equipment occur. Also, the results have provided a respite from the third quarter whose weak outlook prompted the prior sell-off.

Financial Performance

In 2017, Bombardier reported revenue of $16.22 billion, a very slight dip (0.7%) from previous year revenue of $16.34 billion but more worryingly, continuing a trend of declining revenue from the last four years. A ray of hope may be noted that the decline from previous periods was more drastic, i.e. 10% in 2016 and 7% in 2015However, cost of sales also in declined by a much larger percentage (2.3%) in 2017 from $14.62 million to $14.28 while total operating expenses fell by 1.99%, an indicator that the firm may have improved its operational efficiency.However, negative other income/expenses and high finance costs mean that the firm closed another in a net loss position. Net loss for the year was $0.5 million, a drop from the prior year loss of $1.02 million.The statement of financial position reveals that the firm, though liquid has some leverage on its books. In 2017, its total long-term debt was about $9.2 billion, while total liabilities was $28.7 billion, leading to continued negative equity.


BDRBF is clearly on the right track and for the next few months, barring any unlikely negativity, the only way for the company is up.We will be updating our subscribers as soon as we know more. For the latest updates on BDRBF, sign up below!Disclosure: We have no position in BDRBF and have not been compensated for this article.

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