Bombardier: Earnings Preview

by: FP Trading Desk August 29, 2008 | about stocks: BDRAF.PK    

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Bombardier Inc.'s (BDRAF.PK) second quarter should be a good one.

That's the word on the "Street," according to a couple of new reports out Thursday, previewing Bombardier's Q2 results to be announced next week on Sept 4. before market open.

For Chris Murray, analyst at CIBC World Markets, the focus once again will remain on how earnings before interest and taxes [EBIT] margins continue to progress.

In a note to clients, he said:

We have maintained a reasonable level of comfort in the company's revenue outlook given the substantial backlogs within each of the operating divisions and leading products in all the categories where the company operates. We continue to believe that margin expansion will be the primary driver of earnings and valuation.

Mr. Murray is particularly interested in whether Bombardier will finally provide an updated aerospace margin guidance, something it has not done since Guy Hachey took over as president of the aerospace group in May.  If it does, Mr. Murray said he believes the updated guidance will be significantly higher than the current 8% target, ranging somewhere in the low teens to be achieved over a multi-year time period.

The analyst added that Bombardier may also provide updated guidance on the launch of the CSeries and give details on how various orders are progressing.

He maintained his C$11 price target and sector outperformer rating.

RBC Capital Market's analyst Nick Morton also maintained his C$11 price target on the stock and left his "outperform" rating unchanged.

He said aerospace results will be driven by several factors, including strong business jet demand across the industry. 

In a research note, he wrote:

All three of Bombardier's North American business jet competitors reported improved sales and margins for the quarter ended June 30, 2008. We expect Bombardier to report similar success in its Q2/09 results.

As for Bombardier Transportation, Mr. Morton said business is likely "right on track."

He said Bombardier is likely to note its increasing opportunities in China and also its progress in Russia that includes the possibility of a closer relationship with Transmashholding, Russia's largest rail equipment manufacturer and an eventual IPO of Bombardier Transportation.

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