Bombardier (TSX: BBD.B) is a Canada-based aviation company focused on designing, manufacturing, and servicing its portfolio of business jets. It manufactures aircraft such as the Bombardier Challenger, which is well known for its cabin design, cutting-edge innovation, and performance.
Bombardier has a worldwide fleet of 5,000 aircraft in service and serves multinational corporations, charter and fractional ownership providers, private individuals, and governments.
Valued at a market cap of $5 billion, Bombardier stock was trading near multi-year highs in November 2020. It has since returned 638% to shareholders, outpacing the broader markets by a wide margin in this period.
Let’s see if you should own this TSX stock right now.
Is Bombardier a good stock to buy?
Despite an uncertain macro environment, Bombardier reported revenue of $1.85 billion in the third quarter (Q3) of 2023, an increase of 28% year over year. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 36% to $285 million, indicating a margin of 15.4%.
Due to its stellar growth, Bombardier reported a net income of $80 million or $0.73 per share in Q3 compared to a loss of $0.10 per share in the year-ago quarter.
Bombardier’s revenue was driven by higher deliveries and momentum in the aftermarket business, which generated $414 million in sales, an increase of 11% compared to the prior-year period.
The company ended Q3 with a free cash flow of $80 million and $1.2 billion in available liquidity, providing it with enough flexibility to tide over the current macro environment.
Bombardier also reported a backlog of $14.7 billion, providing investors with enough revenue visibility in the near term.
A focus on debt
Bombardier emphasized it does not have any long-term debt due until March 2025. Earlier this year, Bombardier closed its $750 million senior notes offering due in 2029. These notes carry a coupon rate of 7.5%, and the net proceeds were used to finance the repayment of senior notes due 2024 for an aggregate amount of over $500 million.
Bombardier expects it has enough liquidity to fuel the development and upgrade of products and investments. It should also allow Bombardier to meet its liabilities in the near term and pay a preferred dividend to shareholders.
Further, Bombardier emphasized it will refinance or deploy excess liquidity to lower debt, as it continues to navigate a period of elevated interest rates.
Bombardier aims to lower adjusted net debt-to-adjusted EBITDA ratio to less than 2.5 times by 2025. This ratio currently stands at 4.1 times, which is lower than 4.6 times in the year-ago period.
To achieve its leverage goals, Bombardier expects to end 2025 with an adjusted EBITDA of $1.625 billion, a portion of which will be used to lower its balance sheet debt.
What is the target price of Bombardier stock?
Analysts tracking BBD.B stock expect adjusted earnings to improve from $1 per share in 2022 to $5.96 per share in 2024. So, the TSX stock is priced at 8.7 times forward earnings, which is quite cheap given its growth forecasts.
Bay Street remains bullish on Bombardier stock and expects shares to surge over 50% in the next 12 months.
