Bombardier, Inc.: Time to Buy?

Bombardier, Inc. (TSX:BBD.B) just capped a great week. Will the good news continue?

| More on:
The Motley Fool

Bombardier, Inc. (TSX:BBD.B) is finally getting its CSeries program off the ground, and investors want to know if this is the right moment to buy the stock.

Let’s take a closer look at Canada’s iconic plane and train maker.

CSeries developments

Last week was a rare bright spot for Bombardier and its employees.

The positive news began with an announcement that Quebec would make good on its commitment to provide Bombardier with US$1 billion in return for a 49.5% ownership stake in the CSeries program. Quebec gave Bombardier US$500 million on June 30 and will release the remaining US$500 million on September 1.

Confirmation of the investment is important because it shows potential buyers that the government is committed to the program. In fact, Quebec’s support is cited as a major reason why Bombardier managed to secure its recent mega-deal with Delta Air Lines.

A few days after the Quebec funding news, Air Canada provided investors with some anxiety relief by firming up its order for 45 CSeries jets. The Canadian carrier signed a letter of intent back in February, but negotiations with Bombardier and the government had lingered longer than expected, and Air Canada even threatened to walk away from the deal if it didn’t get its way on demands for flexibility on where it can conduct its maintenance work.

With the Air Canada issue put to bed, Bombardier’s investors can check off one more lingering item.

The final triumph of the week was Bombardier’s delivery of the first CSeries to Swiss International Air Lines. It’s a significant event for two key reasons.

First, Bombardier can now start to collect revenue on the CSeries jets. Most airlines don’t pay for planes until they are delivered, and the production delays have put serious strain on Bombardier’s balance sheet.

Second, investors are hoping more airlines will finally step up and place orders for the new jet.

Should you buy?

The recent string of good news should put a floor under the share price, but I still wouldn’t rush to buy the name.

Despite all the good news, Bombardier’s stock finished the week pretty much where it began. That was a bit of a surprise, and investors have to wonder why the share price didn’t push higher.

It’s possible the good news was already priced in and the market is now turning its focus to other concerns.

One is the road to profitability on the CSeries program. Expectations are set for positive cash flow in 2020 or 2021, but analysts are worried the company had to discount the CSeries too heavily to get the Delta deal, and that could impact negotiations on sales to new customers.

Bombardier’s train division is also working its way through some turbulence. The group recently lost two big U.S. contracts to a Chinese competitor and has struggled to meet its commitments on a large streetcar order for the city of Toronto. Now that the CSeries program is stabilized, challenges in other areas of the business could come back on the market’s radar.

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 Andrew Walker has no position in any stocks mentioned.

More on Investing

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »