Bombardier (TSX:BBD.B) stock fell 9.3% as the TSX corrected in December. The stock market has been trending downward as the outlook for 2025 is mixed. The interest rate cuts investors expected in 2025 might not be the same if U.S. President-elect Donald Trump imposes import tariffs. However, the December market correction has created an opportunity to buy stocks like Bombardier with significant growth potential. Between April 22 and May 22, 2024, Bombardier stock jumped 60% to $91 as the company presented its medium-term growth plans on its Investor Day 2024.
Bombardier outlook for 2025
The business jet maker has been beating its outlook since its turnaround began in 2020 under CEO Eric Martel. Although the growth rate is expected to stabilize in 2026, Bombardier is on track to meet its 2025 objective of growing its revenue by 12.5% to US$9 billion. Driving this growth will be Global 8000 large cabin aircraft that will come into service in 2025. A strong order backlog of US$14.7 billion hints that the company can meet its $9 billion revenue target.
The company also aims to increase its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 32% to US$1.6 billion. It plans to improve profitability by increasing its revenue share in high-margin after-sales service and pre-owned aircraft segments.
Bombardier is also looking to reduce its net debt to 2.0-2.5 times the adjusted EBITDA by 2025 from 3.3 times in 2023. It can achieve these targets by increasing EBITDA and paying off more debt.
The multi-year losses have accumulated tax attributes of US$12 billion, which could help Bombardier earn higher profits for the next few years. However, its revenue growth could slow from double-digit to high-single-digits beyond 2025.
The fourth quarter of 2024
Bombardier has a strong outlook with good earnings potential, a strong balance sheet, and robust execution by the management. Meanwhile, Bombardier is on track to deliver 40% of its total deliveries for 2024 in the fourth quarter. The business jet maker estimated 150 deliveries for 2024, of which it delivered 89 aircraft till the third quarter. This means 61 aircraft deliveries are scheduled for the fourth quarter, double the aircraft delivered in the third quarter.
We could expect revenue of US$2.7 billion in the fourth quarter, compared to US$1.5 billion in the third quarter. This revenue could offset the negative operating cash flow of the third quarter because of high inventory costs and trade payables to execute the delivery of 61 aircraft in the fourth quarter.
When Bombardier releases its fourth-quarter earnings in February, its stock could cross $100.
Should you hold Bombardier stock for the long term?
Bombardier’s management is considering partnerships and acquisitions to grow in the future. BBD.B stock is considering dividends and share buybacks beyond 2025. The realistic target, product roadmap, and strong execution make Bombardier a stock to buy and hold till 2030. It has the potential to give you market-beating returns.
