Shares of airline manufacturer Bombardier (TSX:BBD.B) have surged 71% in 2024 and are up almost 300% in the last three years. Valued at $7.7 billion by market cap, Bombardier designs, manufactures, and maintains aircraft for people, businesses, governments, and militaries. Its customers operate a fleet of 5,000 aircraft, and its operations are supported by 10 service facilities across six countries. Its jets are manufactured in facilities located in Canada, the U.S., and Mexico.
While Bombardier stock has crushed broader market returns, let’s see if the TSX stock is still a good buy at the current price.
A strong performance in Q1
Bombardier reported revenue of US$1.3 billion in Q1 of 2024, up 13% year over year, as it plans to deliver 150 to 155 aircraft in 2024.
Bombardier’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stood at US$205 million in the first quarter (Q1), indicating a margin of 16%. Revenue growth and EBITDA margin expansion allowed it to report adjusted earnings of US$0.36 per share in Q1.
BBD ended Q1 with US$1.2 billion in cash and US$1.4 billion in total liquidity as it continues to deleverage the balance sheet by reducing debt.
A healthy balance sheet meant that the credit rating agency Moody’s recently upgraded Bombardier and allocated a B1 rating with a stable outlook, reflecting the company’s consistent performance amid a spectacular turnaround.
Bombardier emphasized that it continues to build resilience through growth pathways that diversify its revenue streams while creating margin and cash upside. Its dynamic businesses, such as Services and Defense, add value to the company and offer customers unique and flexible solutions.
Moreover, Bombardier ended Q1 with a backlog of more than US$14.5 billion, providing investors with significant revenue visibility.
What’s next for Bombardier stock?
Bombardier has increased sales from US$6 billion in 2021 to US$8 billion in 2023. Its operating profit in this period improved from US$232 million to US$786 million while adjusted EBITDA margin grew by more than four times to over 15%. Now, Bombardier aims to end 2025 with over US$9 billion in sales and US$1.625 billion in adjusted EBITDA.
The aircraft manufacturer’s services business has increased sales by 77% since 2020 due to the expansion of its service center network and enhanced customer support offerings. The Services business is forecast to surpass US$2 billion by 2025 and should grow between mid- to high single digitals annually.
Bombardier reported an operating cash outflow of US$343 million and a free cash outflow of US$387 million in Q1, which might make investors nervous. However, the company expects to end 2025 with a free cash flow of US$900 million, which will allow it to lower balance sheet debt and maintain a leverage ratio of less than 2.5 times.
In the last three years, Bombardier has effectively managed debt, enhanced its cost base, and penetrated deeper into its addressable service market.
Analysts tracking Bombardier expect adjusted earnings to improve from $5.39 per share in 2023 to $9 per share in 2025. So, priced at 10 times forward earnings, the TSX stock is really cheap and is positioned to outpace the broader markets going forward.
