Bombardier Inc. is increasingly becoming one of those stocks that analysts like and investors don’t.
Eighteen of the 24 analysts who follow the company rate the shares a buy. But the stock trades at just 7 times earnings and pays an annual dividend of 2.6 per cent.
On Monday, the Montreal-based company introduced its latest model of commercial jet at a key annual industry exhibition in Geneva.
The Learjet 70 and Learjet 75 aircraft are scheduled to enter service in the first half of next year.
Benoit Poirier, of Desjardins Securities, says the two new models target the low end of the business jet segment. And because they are “minor derivatives” of the company’s current generation Learjet 40 and Learjet 45 models, capital costs will be kept low.
According to the analyst, Bombardier has already received more than 50 orders for the new generation aircraft, which has helped increase the company’s Learjet backlog to five months of production at the end of the first quarter, up from two months at the end of the previous quarter.
Bombardier shares failed to climb on Monday’s news, however. At mid-afternoon they traded down two cents at $3.78.
Mr. Poirier rates the shares a buy and has a $6 price target on the stock.
Bombardier reported disappointing first-quarter results on May 10, with executives saying sales of commercial planes had been hurt by tighter credit for new jet financing.
First-quarter profit fell 14 per cent to $190-million (U.S.), and revenue plunged 25 per cent to $3.5-billion.
Several quarters of weak results have tested investor patience. The shares are now worth nearly half as much as they were a year ago. But National Bank Financial’s Cameron Doerksen says the “negativity is more than priced into the stock.”
Following the first-quarter results, Mr. Doerksen raised his recommendation on Bombardier shares to “outperform” from “sector perform,” citing “recent wins, a robust pipeline of new orders and a $32-billion backlog.”
The business jet market appears to be improving and orders for Bombardier’s regional aircraft have picked up recently.
Bombardier’s transportation division has been struggling, but Mr. Doerksen says the outlook is brightening with a recent win to supply $599-million of subway cars to New York and with preferred bidder status for supplying San Francisco’s rapid transit system that could be worth $1.5-billion.
The transportation division has a $32-billion backlog, or more than three years worth of production.
Following Mr. Doerksen’s report, National Bank Financial added Bombardier to its “Action List,” a short list of most-favoured stocks that include: Keyera Corp., MBAC Fertilizer, Suncor Energy Inc., Telus Corp., Tuscany International Drilling Inc., and Valeura Energy Inc.