Bombardier Inc. seems to have settled into a smoother flight path these days.
There have been no additional disclosures of major setbacks on the high-stakes C Series new-jet program. The Learjet 85 finally had its first flight recently after a number of development stalls and glitches. Potential liquidity trouble has been addressed through a debt refinancing. And the rail division has booked about $7-billion (U.S.) in orders so far this year.
But for all that, uncertainty still looms about the company’s ability to make a success of the pivotal C Series project as well as boost its anemic aerospace margins.
Bombardier unveils first-quarter earnings on Thursday and the agenda will no doubt include progress reports on the C Series and on the aerospace unit’s margin performance.
CIBC World Markets analyst Kevin Chiang said in a recent note that 2014 was supposed to have been a “major inflection point” for the Montreal-based company, with the C Series entering service and aerospace margins improving. None of that happened. The C Series is now slated for entry into service in the second half of 2015 and the aerospace margin target has been revised to 5 per cent from 6 per cent.
(The rail division has had its problems, too, but is quickly getting back on track.)
Right now it’s critical for Bombardier to get a fourth C Series flight-test vehicle in the air so it can further accelerate flight-test hours, Mr. Chiang said.
National Bank Financial analyst Cameron Doerksen said business-jet deliveries in the first quarter “fell well short of our forecast” – an estimated 29 compared with 43. “We still expect strong full-year aircraft deliveries for Bombardier, although the target of 200 business jets looks a little aggressive (80 commercial deliveries looks achievable, however).”
On a more positive note, RBC Dominion Securities’ Walter Spracklin said in a recent report that first-quarter orders on both the aerospace and rail sides were “surprisingly strong” with more than $9-billion in bookings.
Orders for the C Series and other models could ramp up during the lead-in to the Farnborough International Airshow in July, he said. If management confirms during Thursday’s conference call with analysts that the flight-test program is going well and the fourth test plane (FTV-4) is ready for takeoff, “this could further add to the potential aero sales ramps as [Bombardier] heads into Farnborough in mid-July.”