MENU

First Brexit… then Trump… Now, it’s time for Pro

Is your portfolio really prepared for what’s coming next?

To help investors like you navigate this historically uncertain — yet high-flying — market and prepare for an inevitable downturn, we’re re-opening our Motley Fool Pro Canada service to a select few new members for a short time.

To discover how Pro Canada could help you to increase your upside potential… reduce your downside risk… and earn paycheque-like income in the process, simply click here — before the small number of spots we have left are all gone!

Bombardier, Inc. Is Losing Momentum

Since 2016 began, Bombardier, Inc. (TSX:BBD.B) shares have gained 50%. The rise has been fueled by a string of positive news in recent months. The company has finalized its bailout package, received certifications for new plane models, signed firm purchase orders with over a dozen companies for CSeries jets, and won a US$1.3 billion contract for its rail business.

Its luck, however, may be running out.

generate_fund_chart

The bad news is piling up

Earlier this week, we tallied up many of the positives and negatives that Bombardier is experiencing right now.

The biggest bad news came on September 1 when the company disclosed that it will halt completion work on its Global 5000 and 6000 business jets during certain periods in 2017 amid ongoing softness in the market for corporate planes. Management cited weak demand from China, Latin America, and Russia.

It turns out that other business segments are also seeing some surprising weakness.

On September 6 Bombardier disclosed that it would more than halve its forecasted CSeries jet deliveries. The company cut its CSeries delivery forecast to seven from 15 aircraft, citing engine delivery delays by its supplier Pratt & Whitney. Due to the news, management now expects its 2016 sales figure to be at the lower end of its previously announced range of US$16.5-17.5 billion.

“We are working very closely with Pratt & Whitney to quickly address this supplier ramp-up issue and to ensure we have a strong supplier base to support our long-term growth objectives,” said Bombardier’s CEO of the situation.

Even the company’s iconic Learjet division is facing struggles. Demand for nearly every class of business jet has slowed due to global economic weakness.

In the first half of 2016, Bombardier sold just six Learjets–down from 14 a year earlier. The company also ditched plans to develop a new Learjet 85 given the weak sales environment. Bombardier’s CEO has lamented that the light business jet market is persistently oversupplied. “We’re still working very aggressively to sell this aircraft in a price-sensitive marketplace … and we’re being very careful and prudent about how we do that,” he said.

Here’s the problem

Nearly every company faces a down-cycle at some point in their operating history. Some companies don’t survive, however.

Today, Bombardier has $9 billion in debt and just $3.8 billion in cash. That wouldn’t be so daunting if the company hadn’t burned through $614 million in operating cash flow and $649 million in capital expenditures last quarter. The quarter before that, it burned through $426 million in operating cash flow and $308 million in capital expenditures.

Many of the company’s current ills stem from its weak financial situation. Why enter into long-term, billion-dollar agreements with a supplier that may not exist in a few years, or even months? Investors may be tempted to view some of the latest bad news as one-off situations, but they may simply add to the fears that buyers feel when looking at Bombardier’s products.

The exclusive buy "signal" you can't ignore

Over the course of The Motley Fool U.S.'s 23-year history, this rare buy "signal" has generated massive wealth for those that have been smart enough to pay attention to it. It's so rare, that it's happened less than two dozen times... but when it does, it's made investors undoubtedly rich. If you're interested in knowing the stock behind this rare buy "signal"-- and you're excited to take advantage of this golden opportunity, then you're going to want to read this. Click here to unlock all the details behind this new recommendation from Stock Advisor Canada.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.