The Motley Fool

Why Bombardier Shares Bombed Today

10% Promise Series

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of aerospace company Bombardier (TSX:BBD-B) plunged 10% today after its quarterly results missed Bay Street expectations.

So what: The stock has plunged since October on concerns over cost-increasing delays, and today’s Q4 miss — adjusted EPS of $0.07 versus the consensus of $0.11 — coupled downbeat guidance only reinforce those worries. While revenue growth of 15% managed to meet estimates, lower-than-expected free cash flow during the quarter and a dampened margin outlook suggest that Bombardier is facing serious near-term funding risks.

Now what: Management lowered its 2014 EBIT margin target from 6% to 5% in the plane segment and from 8% to 6% at its rail division. “We’re both excited and realistic about the next two years,” President and CEO Pierre Beaudoin reassured investors. “We’ve continued to invest during challenging times to improve our leadership position in the market place. We have one overriding objective and commitment: generating strong, sustainable, profitable growth. And our investments are about to pay off.”

Given all the uncertainty surrounding Bombardier’s liquidity position, however, I wouldn’t be so quick to bet too much on that optimism.


Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Brian Pacampara owns no position in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.