People invest in stocks for higher returns or larger payouts later. Unfortunately, the warning that past performance is not a reliable indicator of future performance is valid because volatility is ever-present. Stocks outperform or underperform depending on the impact of market forces on sectors and companies.
For example, Bombardier (TSX: BBD.B) and ATS Corporation (TSX: ATS) rewarded investors with hefty gains in the last three years but have struggled for most of 2023. However, both stocks could make a big comeback this year as tailwinds develop. You can include them in your buy lists this March.
Strong position
Bombardier takes pride in being the leading manufacturer of fine business jets. The two aircraft families of this $4.9 billion Canadian firm, Challenger and Global, are the most comprehensive in the industry today. The BBD stock price rose to as high as $73.78 on March 31, 2023, followed by spikes and dips the rest of the year.
At $49.91 per share (-6.20% year-to-date), Bombardier’s trailing one-year price return is 27.7%, while the overall return in 3 years is 232.7%. Based on market analysts’ 12-month average and high price targets, the stock’s upside potential is between 51.5% ($75.64) and 100.4% ($100.02).
The aircraft manufacturer incurred a net loss of $128 million in 2022 but made a turnaround in 2023. In the 12 months ending December 31, 2023, revenues grew 16% year-over-year to $8 billion, while net income reached $490 million. Notably, the order backlog at year-end was $14 billion.
Bombardier’s President and CEO, Eric Martel, said the company had solid financial performance last year after building on its momentum from the two previous years. He adds the company started 2024 in a strong position too. Bombardier’s refreshed portfolio consisted of medium and large business jets. They sold well because it aligned with market demand.
This year, the aircraft delivery guidance is 150 to 155 units from 138 in 2023. Management forecasts revenue growth of 5% to 7.5%, or $8.4 to $8.6 billion, and projects free cash flow from $100 to $400 million.
Strong fundamentals
ATS Corporation provides end-to-end automation solutions. The $5 billion company from Cambridge, Canada, caters to various industries, including consumer products, food and beverage, energy, life sciences, and transportation. ATS’ reach is global, and it operates in more than 20 countries.
Besides the 65-plus manufacturing facilities, it has over 85 offices in North America, Europe, Asia, and Oceania. Moreover, the strong business fundamentals stem from focusing on large, attractive end markets. Management adds that mergers and acquisitions (M&As) remain a key growth driver.
In Q3 fiscal 2024, revenues and net income rose 16.2% and 61.6% respectively to $752 million and $47.2 million versus Q3 fiscal year 2023. On a year-to-date basis (nine months ending December 31, 2023), the top and bottom lines increased 21.4% and 48.5% year-over-year to $2.2 billion and $145.7 million.
Market analysts are bullish. Their 12-month high price target is $73, or 43.3% higher than the current share price of $50.93. ATS’ total return in 3 years is 79.5%, a compound annual growth rate of 21.5%.
Potential winners
Bombardier and ATS endured massive headwinds last year but are well-positioned to return to the winners’ circle in 2024.
