Bombardier Inc. (BBDb.TO) surpassed analysts’ expectations for fourth-quarter cash flow and reaffirmed its forecast for 2019, steadying the outlook after a disastrous earnings report three months ago.
Free cash flow was US$1.04 billion last quarter, Bombardier said in a statement Thursday. That exceeded the US$890 million average of estimates compiled by Bloomberg. The manufacturer of planes and trains also stood by its financial targets for this year, which include sales of at least US$18 billion and break-even free cash flow, plus or minus US$250 million.
The report stands to boost Chief Executive Officer Alain Bellemare in his effort to regain investor confidence as Bombardier enters the fourth year of a five-year turnaround plan. As the company exits a heavy investment phase in aircraft programs that left it deeply in debt, Bellemare is now attempting to overcome a series of stumbles on high-profile train projects in France, Switzerland, Toronto and New York.
“Free-cash-flow volatility has been an area of uncertainty for investors, and as a result, the reaffirmation should be well received,” Walter Spracklin, an analyst at RBC Capital Markets, said in a note to clients.
The fourth quarter is typically Bombardier’s best for cash-flow generation because that’s when a majority of plane and rail-equipment deliveries occur.
Earnings Relief
But the results provided investors with a respite from the third quarter, when a weaker outlook prompted the biggest selloff in the stock since 2015. The company’s widely traded Class B shares are little changed this year at C$2.04, compared with the 7.1 per cent advance through Wednesday of a Standard & Poor’s index of Canadian industrial companies.
Bombardier swung back to a profit in the fourth quarter, with adjusted earnings of 5 cents a share. That topped the 3 cent average of analyst estimates. Revenue fell 6.7 percent to $4.3 billion, short of expectations for US$4.53 billion.
Business-jet deliveries will probably rise to as many as 155 this year, up from 137 last year, Bombardier said. Demand is benefiting from the December debut of the Global 7500, the company’s biggest-ever luxury plane. Revenue from private aircraft is likely to climb to about US$6.25 billion this year from US$5 billion in 2018, the company said.
Rail Expectations
Bombardier also said Thursday it expects to recover working capital through 2019 and “substantially complete” deliveries on most of the rail projects that have resulted in delays. The Montreal-based company is counting on rail, its largest business, to contribute half of the US$20 billion in sales targeted for 2020.
Laurent Troger stepped down last week as head of Bombardier Transportation after 15 years with the company. He was succeeded by Danny Di Perna, a former executive at General Electric Co. and United Technologies Corp. who joined Bombardier in August as operating chief for aerospace.
Bombardier’s stake in the rail unit dropped to 70 per cent for the year that began Feb. 12, from 72.5 per cent a year ago, because the division fell short of previously agreed performance targets. Caisse de Depot et Placement du Quebec owns a minority of the business under an agreement that adjusts the shareholdings annually depending on performance.
Advertisement