Shares of Bombardier (TSX: BBD.B) continued to climb last week as the airline company reported a strong quarter. Bombardier stock is now up a whopping 40% in the last year as of writing. However, is there more to come? Or is the stock due to start levelling out, if not come back to earth?
Today, let’s analyze the company’s finances, metrics, and strategies to see whether this stock has a future or if the best is already in the past.
What happened?
Bombardier is a global leader in aviation, specializing in the design, manufacture, and servicing of business jets. The company operates primarily in two segments: Business Aircraft and Aviation Services. Over the past few years, Bombardier has streamlined its operations to focus on its core competencies in business aviation.
During the second quarter of 2024, Bombardier stock reported some strong earnings results. Revenue climbed 10% to $1.8 billion year over year, with net income soaring to $45 million, up from a loss of $10 million at the same time last year.
Meanwhile, earnings before interest, taxes, depreciation, and amortization (EBITDA) also climbed 5% to $310 million. Add in earnings per share (EPS) of $0.12, up from a loss of $0.03 the same time last year, and free cash flow to $100 million as well. Altogether, it was a strong quarter, to say the least.
Breaking it down
The question, however, is what’s fuelling this growth? For Bombardier stock, this seems to be from the focus on business aircrafts. This segment saw a 12% rise year over year to $1.5 billion. That growth came down to the strong demand from Bombardier’s Global 7500 and Challenger series jets.
But the aviation services segment didn’t slouch. The company saw a 5% increase here to $300 million, with increased maintenance and service contracts.
There were also improvements in the company’s ratios as well. Bombardier stock saw its gross margin increase to 22% from 21% the year before. Its operating margin remained at 17%, though its debt-to-equity (D/E) ratio improved to 1.8, down from 2.1 last year. Furthermore, its return on equity (ROE) rose to 8% from 6%, reflecting improved profitability.
More to come?
So, what can investors look forward to in the future of Bombardier stock? Investors should see continued investment in the development of new business jet models and enhancements to existing ones. The launch of the Global 8000, expected in late 2024, aims to capture a larger market share in the ultra-long-range business jet segment.
Furthermore, Bombardier has been expanding its global service network, opening new service centres in strategic locations to enhance customer support and drive service revenue. Ongoing efforts to streamline operations and reduce costs have also resulted in improved margins and profitability. The company has focused on supply chain efficiencies and operational excellence.
And now, Bombardier holds a strong position in the business aviation market, competing with major players such as Gulfstream and Dassault Aviation. The company’s focus on high-performance jets and superior customer service provides a competitive edge. However, the market is highly competitive, and Bombardier must continue to innovate and maintain high service standards to stay ahead.
Should you invest?
Now, the big question. Based on the analysis of Bombardier’s recent financial performance, strategic initiatives, market position, and potential risks, the stock certainly looks like a buy. Bombardier stock’s strong revenue growth, improving profitability, and strategic focus on innovation and customer service position it well for future growth. While there are risks associated with economic cyclicality and regulatory changes, Bombardier’s proactive management and strategic initiatives mitigate these concerns. So, certainly keep this stock on your watchlist today.
