Bombardier Inc. (TSX:BBD.B), one of the world’s leading manufacturers of planes and trains, announced first-quarter earnings results on the morning of May 7, and its stock has responded by rising over 2%. Let’s take a thorough look at the quarterly results to determine if we should consider buying in to this rally, or if we should wait for it to subside.
The results that enabled the rally
Here’s a summary of Bombardier’s first-quarter earnings results compared with what analysts had expected and its results in the same period a year ago. All figures are in U.S. dollars.
|Adjusted Earnings Per Share||$0.09||$0.05||$0.08|
|Revenue||$4.40 billion||$4.62 billion||$4.35 billion|
Source: Financial Times
Bombardier’s adjusted earnings per share increased 12.5% and its revenue increased 1% compared with the first quarter of fiscal 2014. The company’s double-digit percentage increase in earnings per share can be attributed to its adjusted net income increasing 12.6% to $170 million, helped by its selling, general, and administrative expenses decreasing 18.3% to just $276 million.
Its slight increase in revenue can be attributed to revenues increasing 4.3% to $1.54 billion in its Business Aircraft segment and 40.5% to $673 million in its Commercial Aircraft segment, but this growth was almost entirely offset by its revenues decreasing 10% to $2.04 billion in its Transportation segment.
Here’s a quick breakdown of eight other notable statistics from the report compared with the year-ago period:
- Revenue increased 0.2% to $471 million in its Aerostructures & Engineering Services segment
- Gross profit decreased 4.6% to $566 million
- Gross margin contracted 70 basis points to 12.9%
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 10.6% to $345 million
- Adjusted EBITDA margin expanded 60 basis points to 7.8%
- Adjusted earnings before interest and taxes (EBIT) increased 8.2% to $237 million
- Adjusted EBIT margin expanded 40 basis points to 5.4%
- Ended the quarter with $6.03 billion in available short-term capital resources, an increase of 56.7% from the beginning of the quarter
Also, at the conclusion of the first quarter, Bombardier reported a backlog valued at approximately $65.8 billion, a decrease of 4.8% compared with the end of the year-ago period, and this included a backlog of approximately $35.9 billion in its Aerospace segment and $29.8 billion in its Transportation segment.
Can the rally in Bombardier’s stock be sustained?
It was an impressive quarter for Bombardier, so I think its stock has responded correctly by rising over 2%. However, I think there is still plenty of room to the upside for the stock.
It trades at attractive valuations, including just 11.2 times fiscal 2015’s estimated earnings per share of $0.22, which is inexpensive compared with its five-year average price-to-earnings multiple of 11.6 and very inexpensive compared with the industry average multiple of 21.5.
With all of the information provided above in mind, I think Bombardier represents one of the best long-term investment opportunities in the aerospace industry today. Foolish investors should take a closer look and consider beginning to scale in to long-term positions.
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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 Joseph Solitro has no position in any stocks mentioned.