Bombardier (TSX:BBD.B): Buy the Dip or Steer Clear?

Bombardier, Inc. (TSX:BBD.B) stock has suffered from an adjustment to the company’s guidance.

| More on:
An airplane on a runway

Image source: Getty Images.

Bombardier (TSX:BBD.B) stock was down 3.49% at the top of the noon hour on May 6. Shares have plunged 17.9% over the past month. The stock plunged after Bombardier released its first-quarter results for fiscal 2019 last week.

Back in February, I’d liked Bombardier’s price ahead of its Q4 earnings release. Shares went on to post annual highs in March. In the article linked above, I discussed how slow growth broadly and specifically in manufacturing could lead to problems for Bombardier and other top companies going forward.

In late April, Bombardier revealed that it cut its full-year profit and revenue forecasts. This was due to delivery days in its key railcar-making unit as well as manufacturing challenges on several large projects. Bombardier has long wrestled with delays and disappointments, which has brought about volatility for the stock over the years.

Bombardier cut its revenue target by a whopping $1 billion to $17 billion for the full year. Core earnings are now expected to be in the range of $1.50-1.65 billion compared to original projections, which ranged from $1.65 billion to $1.80 billion. Bombardier cuts its full-year revenue forecast by $750 million for its transportation and by $250 million for its commercial aircraft business.

The company released its first-quarter results on May 2. Bombardier reported adjusted EBITDA of $266 million on revenues of $3.5 billion. Free cash flow usage surged to $1 billion as Bombardier aggressively pushes forward with its ramp up of the Global 7500 aircraft and key rail projects.

Bombardier leadership reiterated that its core business remains strong in the face of “industrial challenges.” CEO Alain Bellemare cited its $34 billion backlog. However, Bellemare added that Bombardier would need several more quarters to manage its key projects to completion. This may come as disappointing for investors who had hoped for more smooth sailing, as Bombardier seemed to be in the late stages of its recovery.

Broader headwinds may continue to frustrate investors, as we move towards the midway point of 2019. In late April, I’d discussed warnings from the Bank of Canada regarding slow domestic growth. U.S. Q1 growth was stellar, as was its April jobs report, but the global situation is worsening. Stocks plunged on May 6 after trade tensions were reignited between China and the United States. In 2019, the International Monetary Fund (IMF) projects that 70% of the global economy will experience a slowdown in growth.

Bombardier still has an exciting pipeline and an enormous backlog that should excite investors. The stock is now trading at the low-end of its 52-week range. The broader economic environment may be troublesome for shareholders, but the stock has not boasted this kind of value since late 2018. Shares had an RSI of 34 as of mid-afternoon trading on May 6, which puts it close to technically oversold territory.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Investing


Got $5,000? Buy and Hold These 3 Value Stocks for Years

Given their solid underlying businesses, healthy growth prospects, and attractive valuation, I am bullish on these three value stocks.

Read more »

money cash dividends
Stocks for Beginners

Got $1,000 to Invest in Stocks? Put It in This Index Fund

This low-cost beginner-friendly ETF is a great way to invest $1,000.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

3 Cheap Tech Stocks to Buy Right Now

Given their long-term growth prospects and discounted stock prices, I am bullish on these tech stocks.

Read more »

money cash dividends
Dividend Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Want some absurdly cheap stocks for your portfolio? Here are two options trading at a huge discount right now.

Read more »

Gas pipelines
Dividend Stocks

TFSA Passive Income: Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a yield near 8%. Is the dividend safe?

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Wanna Beat the Market? Try These 2 Tech Stocks That Look Undervalued Today

Here's why undervalued TSX stocks such as Vitalhub can help you generate outsized gains in the next 12 months.

Read more »

Redwood trees stretch up to the sunlight.
Tech Stocks

These 3 Magnificent Stocks Keep Driving Higher

Constellation Software, Dollarama and another TSX stock have consistently generated positive investment returns. Here’s why they belong in your retirement…

Read more »

sale discount best price
Dividend Stocks

3 Stocks to Buy While They Are on Sale

Top TSX dividend stocks are trading at discounted prices.

Read more »