Bombardier’s (BBDb.TO) recent performance has Raymond James convinced the plane and train-maker has turned a corner. In a research note to clients, Raymond James Equity Analyst Steve Hansen raised his 12-month price target to $3.25, implying nearly 30 per cent upside potential, and upgraded his recommendation to the equivalent of a buy.
“Building on prior momentum, [Bombardier’s second-quarter] results offered multiple new data points to suggest its transformation plan is reaching full stride,” Hansen wrote. “Given this progress, management now expects consolidated [earnings] to land in the ‘top half’ of its [full-year 2017] guidance range, supported by higher [full-year] margin guidance at both [Bombardier Transportation] and [Bombardier Aerospace].”
Hansen wrote that he’s encouraged by the progress Bombardier is making with its CSeries narrowbody jet, a platform that’s gained traction since its first flight with Swiss Air in July of last year.
“After a difficult start to [2017,] CSeries deliveries are starting to re-accelerate, evidenced by four deliveries in [the second quarter,]” Hansen wrote.
“Looking ahead, management expects deliveries to roughly double in [the third quarter] and again in [the fourth quarter,] putting Bombardier on target to reach ~30 aircraft in 2017. At this juncture, we’re inclined to think 27-28 is more realistic; however, we also believe the directional trend is more important than a precise target.”
Hansen wrote that he is keeping a close eye on any possible Bombardier Transportation tie-ups, amid speculation that Bombardier may pursue a combination with Siemens’ rail division.
“While nothing ‘new’ was revealed, management confirmed they are currently evaluating all options to proactively position BT to succeed in a competitive landscape fundamentally altered by recent Chinese mega-mergers,” Hansen wrote. “We will continue to monitor accordingly.”
Bombardier has 13 buys, seven holds and three sell ratings, and an average 12-month target price of $2.91.
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