What You Need to Know About Bombardier

New contracts, delays and canceled deals mean a rough four weeks for this stock.

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The Motley Fool

There’s been quite a bit of activity within the walls of Bombardier (TSX:BBD) over the past four weeks, which has driven its stock down to a nine-month low. So what is going on with the Quebec-based company?

Railcar gains

Bombardier announced on January 17, 2014 that it, in conjunction withe several partners, had won a $4.1 billion contract with the Australian state of Queensland. Bombardier’s share of the contract is expected to $2.7 billion; in exchange, it will deliver 75 electrical multiple units, build a rail depot and provide 30 years of maintenance.

Bombardier also received an additional order from the San Fransisco Bay Area Rapid Transit District for another 365 rail cars at a cost of $639 million, bringing the total order originally signed in 2012 to 775 rail cars for $1.6 billion.

These new orders are over and above Bombardier’s current metro car orders in North America, including: 714 cars for Chicago, 468 cars for Montreal, 420 cars for Toronto and 300 cars for New York.

Aircraft delays

On January 16, 2014 Bombardier reluctantly announced the delay of its “C Series” aircraft program. After an initial test flight in September and a second in early January, the company has determined that, “the flight test phase will require more time than originally anticipated to ensure, amongst other things, that the aircraft has the overall system maturity to support a successful entry-into-service.” No further detail has been released on the reasons for the delay.

The announcement that the aircraft will be pushed back to the second half of 2015 has been a driving force in the stock’s decline, and a financial report on the program is expected on February 13.

The “C Series” was designed to meet the needs of the 100-149 seat market and is promoted as being 12,000 lbs lighter than any of its competitiors. Bombardier currently has booked orders and commitments for 445 C Series aircraft, which include firm orders for 198 C Series airliners.

Unfortunately this revelation came mere hours after the company announced a new order from Saudi Arabia’s Al Qahtani Aviation Co. The order is for 16 CS300s at a price of $1.2 billion, and carries an option for 10 additional aircraft, which could bring in a total of $2 billion for the company.

London losses

All of this comes just a couple of weeks after Bombardier lost a contract for signaling upgrades signed in 2011 with the London Transit System. So far, $140 million in work had already been completed by Bombardier of the originally contracted $622 million.

The reason for the cancellation has not been officially released, but reports from London suggest there was an incompatibility between the signaling systems and current infrastructure.

Foolish bottom line

Between the delays in the “C Series” aircraft, the loss of the London contract and the new deal in Australia, Bombardier is riding quite the roller coaster of activity. While the stock may have taken a beating, the company still has enough plates spinning to offset any catastrophic events. There are hopefully enough orders on the books to maintain the company despite a rough start for 2014.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway does not own any shares in the companies mentioned.

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