On Wednesday, CIBC (TSX:CM) analyst Kevin Chiang increased the stock price target on Bombardier Inc (TSX:BBDb). (BBD/B:CN) (OTC: BDRBF) to C$132.00, up from the previous target of C$131.00. The firm maintained its Outperformer rating on the stock.
The company's shares have shown remarkable momentum, delivering a 101% return over the past year according to InvestingPro data, with particularly volatile price movements that present opportunities for active investors.
Chiang highlighted Bombardier (OTC:BDRBF)'s Free Cash Flow (FCF) target for 2024, which is projected to be between US$100 million and US$400 million. He suggested that the figure might lean toward the lower end of this spectrum.
With a solid financial health score of "GOOD" from InvestingPro and revenue growth of nearly 13% in the last twelve months, Chiang praised Bombardier's strategic decision to build up inventory to meet its delivery targets for the year, which is expected to include around 60 units in Q4. This approach is seen as a way to mitigate revenue risks, particularly in the face of current supply chain challenges affecting the aerospace sector.
Bombardier's financial outlook appears positive, with the company expecting to benefit from strong FCF growth into 2025 and beyond. The company has set an ambitious FCF goal of over US$900 million for next year, with forecasts indicating the potential to exceed US$1 billion per year in the latter half of the decade.
In terms of capital expenditures, Bombardier plans to maintain them at approximately US$300 million post-2025. Moreover, the company does not anticipate the need for the development of entirely new aircraft models throughout the current decade. This decision reflects a strategic choice to focus on its existing product lineup and operational efficiencies.
Trading at a P/E ratio of 16x and showing signs of being undervalued according to InvestingPro's Fair Value analysis, Bombardier offers an interesting proposition for value investors. Get access to the complete Pro Research Report and 7 additional ProTips for deeper insights into Bombardier's investment potential.
In other recent news, Bombardier Inc. reported a robust financial performance in its third-quarter earnings call. The Canadian aerospace company saw its total revenues rise by 12% year-over-year, reaching $2.1 billion. A notable highlight was the company's service revenue, which hit a record $528 million, contributing significantly to the overall revenue. Adjusted EBITDA also rose by 8%, reaching $307 million.
The management team, led by CEO Éric Martel, shared insights into the company's strategic focus, which includes the expansion of its aftermarket services and the successful first flight of the Pegasus program.
They also anticipated a strong fourth quarter with substantial free cash flow and deliveries. Despite some supply chain issues marginally impacting gross margins, the company is optimistic about future delivery stability as the supply chain normalizes.
These are recent developments that underline Bombardier's successful navigation through supply chain challenges, as well as its strategic plans for expansion and capital allocation. The company is on track to meet full-year guidance for revenues and EBITDA, with a strong focus on maintaining stable production rates for its Globals and Challengers into 2025.
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