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On Monday, UBS analyst Gavin Parsons (NYSE:PSN) upgraded Bombardier (OTC:BDRBF) stock from ’Sell’ to ’Neutral’ and increased the price target to C$95.00, up from the previous target of C$77.00. The adjustment follows Bombardier’s better-than-expected performance in new aircraft bookings and their cautious approach to production. According to InvestingPro data, the company appears undervalued, with a market capitalization of $6.13 billion and impressive revenue growth of 7.69% in the last twelve months.
Bombardier has maintained steady aircraft production rates to avoid market oversupply, a strategy that has resonated positively with UBS. The recent $400 million settlement received from Honeywell (NASDAQ:HON) is also seen as a significant factor that mitigates cash flow risks and contributes to lowering the company’s leverage. InvestingPro analysis shows the company generated $232 million in levered free cash flow, with an EBITDA of $1.069 billion in the last twelve months.
Over the past 18 months, Bombardier’s stock value has risen by 80%, outperforming the S&P 500’s 38% increase, despite consensus free cash flow estimates for 2024 and 2025 being 62% and 21% lower than the consensus at that time. UBS acknowledged that the leverage from delivering new aircraft and the contribution of services to normalized EBITDA had been underestimated.
While acknowledging the potential for end-market pressures, UBS anticipates a continued decrease in leverage and believes that Bombardier’s cash generation, although below consensus expectations, will be sufficient to support the stock price. The firm also noted that while tariff risks could create some short-term irregularities in order patterns, they foresee limited impact on the company in the medium term. For deeper insights into Bombardier’s financial health and growth prospects, including exclusive ProTips and comprehensive valuation metrics, visit InvestingPro.
In other recent news, Bombardier Inc (TSX:BBDb). is gearing up to announce its fourth-quarter results for 2024, with expectations of meeting or surpassing its financial targets, according to BMO Capital Markets. Analyst Fadi Chamoun from BMO raised the company’s stock price target to C$135, citing a strong foundation for continued outperformance in 2025. Meanwhile, RBC Capital adjusted its price target for Bombardier to C$130, maintaining an Outperform rating and highlighting the company’s potential for a double-digit free cash flow yield by 2026. RBC Capital also expects Bombardier to reaffirm its 2025 financial targets, including an EBITDA of over C$1,625 million and a free cash flow of over C$900 million.
CIBC (TSX:CM) analyst Kevin Chiang increased Bombardier’s stock target to C$132, maintaining an Outperformer rating. Chiang pointed out Bombardier’s strategic inventory buildup to meet delivery targets, which is aimed at mitigating revenue risks amid supply chain challenges. Bombardier’s financial outlook remains positive, with plans to achieve significant free cash flow growth into 2025 and beyond. The company has set ambitious goals for free cash flow, projecting over US$900 million for next year, with potential to exceed US$1 billion annually later in the decade. Additionally, Bombardier plans to maintain capital expenditures at approximately US$300 million after 2025, focusing on its existing product lineup without developing new aircraft models this decade.
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