Bombardier, Inc. Sales Are Heating Up

Bombardier, Inc. (TSX:BBD.B) is turning the corner.

| More on:
The Motley Fool

After enduring years of financial losses alongside a perpetually sinking share price, are things finally turning around for Bombardier, Inc. (TSX:BBD.B)?

generate_fund_chart

More orders on the way

Bombardier seems to be on fire lately.

In April Chorus Aviation Inc. announced that it signed a firm purchase agreement to acquire five CRJ900 regional jets from Bombardier with purchase rights for five additional aircraft. The 76-seat regional jets will enter service in 2017.

Bombardier also completed a $184 million deal with Trident Jet Ltd. for four CRJ900 aircraft in April. Its biggest deals, however, came from major airline carriers. This year, it received an order for 45 CSeries jets from Air Canada in addition to a deal with Delta Air Lines for 125 CSeries jets (75 initial orders and an option for 50 more). Delta is the first major U.S. airline to order Bombardier’s latest jet line.

This month, the orders continued to roll in. On June 1 WestJet Airlines Ltd. signed a firm order for nine Bombardier Q400 turboprops, expanding its fleet to 45 Q400 aircraft. Apart from aviation, the company also recently announced that it won a contract to supply 43 trains to European rail operator Abellio Rail Südwest for US$244 million.

Bombardier is also exploring options to ramp up CSeries sales even faster. Recent reports show that it’s interested in developing a +150-seat CSeries jet that would allow it to tap a significantly larger market where there seems to be an appetite for the company’s fuel-efficient engines.

By building larger models that fit more naturally into airlines existing fleets, Bombardier could see demand surge. Last year, it actually lost a deal with Delta Air Lines because it didn’t have a larger version of the CSeries available. British Airways has also shown interest in a larger version of the plane.

While the original CSeries plane has endured consistent difficulties, Bombardier president Fred Cromer is excited about the long-term potential. “I think more and more people are understanding what the plane can do and what the benefits are and are starting to talk about this plane being a part of the permanent landscape for the small narrow-body segment,” he said this week.

Is a successful turnaround possible?

Lately, the market seems to have a much higher opinion of Bombardier. Since the year began, shares are up roughly 50%. Still, major hurdles remain.

Currently, the firm has roughly $9 billion in debt and only $3.2 billion in cash. Even with optimistic assumptions, Bombardier management believes that it requires $2 billion in additional financing over the next five years to complete the CSeries project. With its current business racking up multi-billion dollar losses, it’s unlikely that Bombardier can finish up its CSeries jet line on its own.

To plug the financing hole and have any hope of bringing the existing CSeries line to market, Bombardier will likely require an additional bailout. After receiving a $1 billion bailout from the Quebec government earlier last year, Ottawa and the federal government are readying another $1 billion cash infusion.

Things are looking up, but there’s no doubt that Bombardier still needs to undergo another major restructuring if it hopes to survive.

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 Ryan Vanzo has no position in any stocks mentioned.

More on Investing

Canadian Dollars bills
Dividend Stocks

Invest $15,000 in This Dividend Stock, Create $5,710.08 in Passive Income

This dividend stock is the perfect option if you're an investor looking for growth, as well as passive income through…

Read more »

woman looks out at horizon
Stocks for Beginners

Here’s How Much Canadians at 35 Need to Retire

If you want to create enough cash on hand to retire, then consider an ETF in one of the safest…

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

3 Compelling Reasons to Delay Taking CPP Benefits Until Age 70

You don't need to take CPP early if you are receiving large dividend payments from Fortis Inc (TSX:FTS) stock.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Better Dividend Stock: TC Energy vs. Enbridge

TC Energy and Enbridge have enjoyed big rallies in 2024. Is one stock still cheap?

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

Is South Bow Stock a Buy After its Split From TC Energy?

Let’s see if South Bow stock's current valuation makes sense.

Read more »

Concept of multiple streams of income
Dividend Stocks

Got $10,000? Buy This Dividend Stock for $4,992.40 in Total Passive Income

Want almost $5,000 in annual passive income? Then you need a company bound for even more growth, with a dividend…

Read more »

ETF stands for Exchange Traded Fund
Investing

Passive Income Investors: This TSX Fund Has a 7.6% Yield With Monthly Payouts

Here's all you need to know about the Canoe EIT Income Fund (TSX:EIT.UN)

Read more »

stock research, analyze data
Tech Stocks

Apple vs. Shopify: Which Stock Is the Better Buy for the Next 3 Years?

Apple (NASDAQ:AAPL) and Shopify (TSX:SHOP) are great tech titans, but they're ending the year with huge momentum.

Read more »