Are you invested in Bombardier (TSX:BBD.B)? The plane manufacturer is one of the handful of options outperforming the market this year. But can Bombardier stock keep beating the market?
Let’s try to answer that question.
Source: Getty Images
Meet (the new) Bombardier
Bombardier (TSX:BBD.B) is a stock that seasoned investors are well aware of. In fact, many still have the scars from the company’s development of the CS-series aircraft, which almost bankrupted the company.
That led to a painful, multi-year transition for the aircraft maker, which involved paying down debt, trimming entire segments from its portfolio, and focusing on its core niche.
Thankfully, today’s Bombardier is a very different company. First and foremost, the company is now a pure-play business jet operator, having exited other markets.
That focus, and by extension, a slew of superb product releases, has helped Bombardier stock beat the market.
And it comes down to a few key reasons
Why Bombardier stock is beating the market
First, let’s talk about those superb product releases. The company’s global line of jets, particularly the Global 7500 and 8000, remains some of the best and most sought after ultra-long range business jets on the market.
The 7500 was certified back in 2018 with a slew of records and improvements over the business jet market. The 8000, which is set to enter service next year, will push the needle even further. Incredibly, those achievements include a whopping 14,800 km range and a top speed of Mach 0.94.
To put it another way, the Global 8000 will be the fastest civilian aircraft since the Concorde stopped flying two decades ago.
That translates into a massive opportunity for investors.
The second reason why Bombardier stock is beating the market is the company’s MRO (maintenance, repair and overhaul) services. This also includes selling parts for its fleet of aircraft.
The segment is highly profitable and the increase in demand and, by extension, sales of its aircraft led to an uptick in this predictable, yet lucrative revenue stream.
Finally, there’s that debt reduction mentioned above. If we look back a few years to when the company was struggling in 2019, Bombardier had debt of over $12 billion, with a market cap of just $4.6 billion.
Today, those numbers are very different. As of the time of writing, Bombardier’s market cap is north of $16 billion, and it owes a more manageable $7 billion.
In other words, the company has improved massively, and Bombardier stock may keep beating the market.
Will Bombardier stock keep beating the market?
No stock is without risk. Seasoned investors know that Bombardier’s troubles could resurface. That being said, Bombardier does offer a more streamlined and profitable business than it did in the past.
In my opinion, a small position in Bombardier remains a great option for long-term investors seeking growth in a larger, well-diversified portfolio.
