Wednesday, July 18, 2012

Bombardier Not Flying So High, for Now - Morningstar, Stock Strategist Industry Reports

By Neal Dihora, CFA 
Morningstar,  Stock Strategist Industry Reports

Slumping regional aircraft sales are weighing on the stock, but we think this provides a good entry point for investors 

Bombardier's stock currently reflects negative sentiment about its weak position in the regional aircraft market.   Its anemic orders and deliveries are casting a shadow over the rest of the business, which we believe continues to perform well, particularly in rail transportation. We agree these concerns are warranted, but the problematic regional aircraft segment only generates 15% of total company sales. Our estimates call for continued weakness in regional aircraft and a gradual improvement in rail transportation to arrive at a fair value estimate of CAD 7. Still, a new recession could reduce demand for business jets and worsening conditions in Europe have the potential to cause contract delays in rail transport, thus pressuring the stock somewhat from current levels. But considering the many scenarios, we think the stock currently provides a good entry point for investors.

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