After rocketing by 343% in the previous three years combined, Bombardier (TSX:BBD.B) stock is continuing to outperform the broader market by a huge margin in 2024. Bombardier stock jumped by 46.3% in May 2024 alone, making it the top-performing TSX stock for the month. It currently trades at $86.88 per share with a market cap of $8.8 billion after surging by 65% year to date compared to 4.4% advances in the TSX Composite benchmark.
Given Bombardier stock’s stellar performance, many long-term investors might wonder if Bombardier stock is still a good buy. Before I try to answer that question, let’s look deeper into the main fundamental factors that have driven its recent rally.
Why Bombardier stock rallied by 46% in May
Bombardier’s impressive stock surge in May was mainly guided by a series of positive developments that highlighted the company’s strategic initiatives and robust operational performance. Early in the month, Bombardier announced a substantial order from NetJets for 12 Challenger 3500 aircraft, with options for an additional 232 jets. This deal, valued at over US$6 billion if all options are exercised, clearly reflected the strong demand for Bombardier’s aircraft and reaffirmed the solid relationship with its long-time client.
Also, the Canadian business jet manufacturer’s latest Investor Day, held on May 1, revealed that Bombardier is on track to meet its ambitious 2025 objectives, focusing on continuous product improvements and expanding high-return business segments.
Further boosting investor confidence, Bombardier inaugurated the Aviator Lounge in Monaco and a new Bombardier Defense office in Australia last month, showcasing its commitment to enhancing customer experience and expanding its global footprint. These strategic initiatives, coupled with the issuance of new senior notes to strengthen its balance sheet, could be the primary reason why Bombardier stock staged a big rally in May.
Is Bombardier stock still a buy today?
Besides these recent positive developments, Bombardier stock’s consistently improving financial performance has also contributed to its stock price appreciation in the last few years.
Despite macroeconomic challenges, including inflationary pressures and high interest rates, the company registered a strong 16.4% YoY (year-over-year) increase in its total revenue in 2023 to US$8 billion. More importantly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) during the year jumped by 32.3% YoY to US$1.2 billion.
Bombardier’s profitability is continuing to improve this year as its adjusted EBITDA margin in the first quarter of 2024 expanded to 16% from 14.6% a year ago. During the quarter, the company’s unit order intake witnessed a solid 60% YoY increase, which led to a significant US$700 million increase in backlog, bringing it to US$14.9 billion. Its strong unit book-to-bill ratio of 1.6 reflects healthy demand for Bombardier’s aircraft.
Moreover, Bombardier’s long-term growth prospects remain promising as it continues to focus on expanding service revenues, effective debt management, and increasing aircraft deliveries supported by robust backlog. These positive factors provide a strong base for Bombardier to pursue its strategic transformation and unlock its full potential, which can help its stock continue soaring in the years to come.
