Bombardier Inc. (TSX:BBD.B), the world’s only manufacturer of both planes and trains, announced fourth-quarter earnings before the market opened yesterday and the results surpassed analysts’ expectations.
Let’s break down the quarterly results to determine if we should consider initiating long-term positions today, or if we should wait for a better entry point in the trading sessions ahead instead.
The quarterly results are in
Here’s a summary of Bombardier’s fourth-quarter earnings compared what analysts had anticipated and its results in the same period a year ago.
| Metric | Reported | Expected | Year Ago |
| Earnings per share | $0.04 | $0.03 | $0.07 |
| Revenue | $5.96 billion | $5.80 billion | $5.32 billion |
Source: Financial Times
Bombardier’s earnings per share decreased 42.9% and its revenue increased 11.9% compared to the fourth quarter of fiscal 2013. The company’s steep decline in earnings per share can be attributed to adjusted net income decreasing 35.7% to $83 million, while its double-digit increase in revenue can be attributed to strong sales growth in both of its major segments, including 15.8% growth to $3.33 billion in its Aerospace segment and 7.5% growth to $2.63 billion in its Transportation segment.
Bombardier also noted that it delivered a total of 101 aircraft during the fourth quarter, compared to 83 in the year-ago period, and it received 67 net orders, compared to 252 in the year-ago period.
Here’s a quick breakdown of eight other notable statistics and updates from the report compared to the year-ago period:
- Gross profit increased 3.2% to $646 million.
- Gross margin contracted 100 basis points to 10.8%.
- Operating profit before special items decreased 16.1% to $156 million.
- Operating margin contracted 90 basis points to 2.6%.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased 6.8% to $272 million.
- Adjusted EBITDA margin contracted 90 basis points to 4.6%.
- Cash provided by operating activities decreased 30.5% to $1.03 billion.
- Free cash flow decreased 23.5% to $590 million.
Finally, at the conclusion of the fourth quarter, Bombardier reported a backlog valued at approximately $69.1 billion, a decrease of 0.9% from the year ago period, and this included a backlog of approximately $36.6 billion in its Aerospace segment and a backlog of approximately $32.5 billion in its Transportation segment.
Does Bombardier represent a long-term opportunity?
Bombardier is one of the world’s largest manufacturers of planes and trains, and increased demand for its products led it to a very strong performance in the fourth quarter of fiscal 2014.
I think Bombardier’s stock represents a fantastic long-term investment opportunity, regardless of how it reacts to the earnings release over the next couple of trading sessions, because it trades a very low valuations, including just 8.7 times fiscal 2014’s adjusted earnings per share of $0.35 and only 7.1 times analysts’ earnings per share expectations of $0.43 in fiscal 2015, both of which are very inexpensive compared to its five-year average price-to-earnings multiple of 11.6.
With all of the information above in mind, I think Bombardier represents one of the best long-term investment opportunities in the market today, so investors should take a closer look and strongly consider initiating positions.
