BMO Capital Markets hosted Bombardier executives for meetings with investors between May 23 and May 25. (Picture: courtesy)
What to do with the securities of Bombardier, Exchange Income Corporation and Dollarama? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.
Bombardier (BBD.B, $56.08): the company wants to improve its profitability, regardless of economic cycles
BMO Capital Markets hosted Bombardier executives for meetings with investors between May 23 and May 25, including a tour of the company’s premises in Biggin Hill, UK.
Analyst Fadi Chamoun came out more convinced in his investment thesis, which is based on an “outperformance” recommendation and a one-year target price of $85.
“Bombardier is continuing to put in place a few initiatives that we believe will support improved profitability and cash flow regardless of economic cycles for a year or two,” he said.
The analyst is of the opinion that the business jet sales cycle is not overheating. “Bombardier management has clarified that demand for business jets remains strong, with an expected book-to-delivery ratio of 1 for fiscal year 2023 despite the current macroeconomic weaknesses,” he said.
Fadi Chamoun maintains that the after-sales service division is on track to reach the upper end of the revenue range of 1.6 to 1.7 billion dollars (B$) this year. “Bombardier is increasing its market share, its aircraft fleet is expanding and the high level of aircraft utilization continues to generate robust organic growth in this division with high profit margins,” he said. In his opinion, Bombardier will have no trouble reaching its annual revenue target of $2 billion in 2025.
“After a period of investment and expansion to increase its worldwide presence in aftermarket services, the company is turning its attention to efficiencies, which will further improve its profitability. Bombardier wants to achieve a 50% market share in this niche by 2025, but there will still be opportunities for the company to seize thereafter,” believes the analyst.
The latter notes the weakness of orders in the first quarter (19-20 devices), while the company hopes to obtain 140 in 2023. However, he expects a rebound in the second quarter.
“Aircraft availability remains very low by historical standards and the increase in users in recent quarters has driven the number of flights up,” he said, adding that one of the company’s largest customers Bombardier, VistaJet, reported a 55% year-over-year increase in hours sold in the first quarter.
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