Bombardier, Inc. (TSX:BBD.B) had a decent year. The stock rallied as orders and contracts flowed in throughout the year.
The management team is not the best in the world, as most of its projects are both over budget and past their deadlines. We’re not talking slightly over budget or a few months behind schedule; we’re talking billions of dollars over budget and years behind schedule. This takes poor estimation to a whole new level, and Bombardier has received a lot of heat from its clients because of this.
Poor management team presents risks for investors
It’s clear that the management team really has no idea how much a project will cost. This is a huge turn-off to potential customers, as they can easily take their business to Bombardier’s competitors. The company even lost clients who signed on the dotted line because of the countless number of delays to deliveries.
There’s no question that R&D is a disaster, but the Quebec government is willing to spend money to bail this poorly run company out. The last few years have been hard on Bombardier, but the company may finally start to pick up, as orders for its jets, and trains start coming in.
Train and plane contracts may start picking up momentum next year
Orders are starting to come in fast now, and as we head into 2017, we may see orders pick up momentum. If Bombardier can deliver on these contracts with minimal delays, then the stock could very easily double from the current stock price. Keep in mind that the company has a difficult time keeping things on schedule, but if the management team can clean up their act, there could be huge upside for investors in the stock.
The train division has been firing on all cylinders lately. Bombardier recently won a commuter train contract with the French National Railway Company. The order is for 52 commuter trains, which is valued at approximately $496 million.
Bombardier also won an eight-year contract in Montreal, where it will operate and maintain the commuter rail fleet. The deal is worth $331 million and will give Bombardier a much-needed boost to its top and bottom line for the next few years.
The plane division also looks quite strong, as orders for the CSeries line of jets are coming in from all around the world. Air Canada and Delta Airlines Inc. have both placed large orders to obtain the jets, and even Air Tanzania wants a piece of Bombardier’s jets; the company placed an order worth US$203 million.
Huge upside potential if the management team can get things in order
There’s no question that demand for Bombardier’s products is starting to pick up, and next year they will have a lot more orders to fill. If you believe that the management team can meet most or all of these orders on time, then Bombardier is a fantastic buy today. But be warned: the management team has disappointed in the past, and if it continues to disappoint, who knows if the Quebec government will be there to bail them out again.
