Shares of Bombardier (TSX: BBD.B) are continuing to underperform the broader market in 2023. While Bombardier stock has lost 5.1% of its value on a year-to-date basis, the TSX Composite Index has risen 4.9% during the same period. With this, the Canadian business jet maker currently has a market cap of $4.9 billion, as its stock trades at $49.62 per share.
Before we discuss what to expect from Bombardier stock in 2024, let me quickly highlight some key fundamental factors that have taken a toll on its investors’ sentiments in 2023.
Key factors for Bombardier stock’s poor performance in 2023
It’s important to note that Bombardier has made some significant changes in its business model in recent years, shifting its focus primarily to business aviation. This strategic move involved divesting from other segments, including commercial aviation and rail transportation, allowing the company to streamline its operations and concentrate resources.
As a result of this restructuring process, Bombardier has been able to reduce its debt burden substantially, leading to improved financial stability and growth. These strategic changes have also played an important role in turning the company’s fortunes around and boosting its long-term financial growth outlook. These are some of the key reasons why Bombardier share prices popped by about 336% in 2021 and 2022 combined.
However, the ongoing macroeconomic challenges have made investors worried about the business jet aircraft demand outlook. Investors believe that any softness in the demand in the near term could hurt Bombardier’s financial growth trends. These concerns explain why Bombardier stock has underperformed the main TSX index in 2023 so far.
What to expect from Bombardier stock in 2024
Despite macroeconomic challenges, Bombardier’s financial growth trends remain strong. The company’s increased focus on business jet manufacturing is the primary reason why it managed to post a strong 13.6% YoY (year-over-year) increase in its 2022 revenue to US$6.9 billion. Similarly, it posted adjusted annual earnings of US$0.74 per share in 2022 against its adjusted net loss of US$3.75 per share in the previous year.
Its rising aircraft deliveries and improved operational performance have already driven its total revenue up by 17.1% YoY in the first three quarters of 2023 to US$5 billion. To add optimism, its adjusted earnings during these nine months stood strong at US$2.51 per share compared to an adjusted net loss of US$1.33 per share during the same period of the previous year.
In 2024, the company is expected to increase aircraft deliveries further, which should further improve its financial growth trends.
The Foolish bottom line
While Bombardier stock’s performance in 2023 has largely remained disappointing due mainly to ongoing economic challenges, recent indications that the central banks in the United States and Canada may not need to hike interest rates further to fight high inflation come as a big relief for investors. As the economic scenario continues to improve in the coming quarters, Bombardier could regain investors’ confidence, which can help its share prices rally. Considering this positive outlook, the recent declines in its share prices could be an opportunity for long-term investors to buy this fundamentally strong TSX stock at a bargain now.
