Investor concern over Bombardier spending pushes shares lower

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Investor concern over a surge in the company's use of cash in the first quarter pushed Bombardier Inc. shares lower even as senior management said spending is under control and there are no liquidity problems.

The Montreal-based plane and train maker burned through $915-million (U.S.) in the first quarter, almost double the $590-million spent in the same period a year ago.

Bombardier has been investing heavily in new projects, including the new C Series commercial jet and the Learjet 85 business jet; it has encountered a series of delays and technical problems on those projects.

"Over all, we view these results negatively, mainly due to the significant and unexpected [free cash flow] usage in the quarter," RBC Dominion Securities analyst Walter Spracklin said in a research note Thursday.

Available short-term capital at the end of the first quarter stood at $3.9-billion, down from $4.8-billion at the end of last year.

Bombardier shares were trading at $4.19 (Canadian) on the Toronto Stock Exchange early Thursday afternoon, down 22 cents or almost 5 per cent, after falling by as much as 8.2 per cent to $4.05 in earlier activity.

Bombardier chief financial officer Pierre Alary said on a conference call for analysts and media Thursday that the company is comfortable with its liquidity status and is sticking to guidance of $1.6-billion to $1.9-billion in aerospace capital expenditures this year.

"We have ample liquidity to meet our plan," he said, adding that spending is expected to ease off in future quarters.

Bombardier president and chief executive officer Pierre Beaudoin said on the call that the company has a record backlog of $76.9-billion, up from $69.7-billion in the year-earlier period, positioning the manufacturer for "strong revenue growth over the next five years."

Mr. Beaudoin also said he's confident the company will reach its target of 300 firm orders for the C Series by the time of the plane's entry into service, planned for mid-2015.

The Montreal-based plane and train maker said profit in the first quarter was $115-million (U.S.) or 6 cents per share, compared with $148-million or 8 cents in the year-earlier period.

On an adjusted basis, earnings were $151-million or 8 cents a share, compared with $156-million or 8 cents a year ago.

Revenue in the first quarter came in at $4.4-billion, compared with $4.3-billion in the same period last year.

The $4.4-billion in revenue fell short of analysts' estimate of $4.59-billion.

Industry analysts anticipated earnings-per-share of 8 cents for the quarter.

The rail division booked a record $8-billion in orders in the quarter, up from $2-billion in the year-earlier period.

Bombardier Transportation – the company's rail unit – posted revenue of $2.3-billion, up from $2.1-billion in the first quarter.

The world's third-largest civil aviation manufacturer said it took in 91 aerospace orders in the quarter, up from 28 in the same period last year.

Bombardier Aerospace delivered 56 aircraft in the quarter ended March 31, 2014, up slightly from 53 for the same period last year.

Of the 56 planes, 43 were business jets – up from 39 a year ago – and 13 were commercial aircraft, unchanged from last year.

Mr. Beaudoin said on the conference call the C Series program is on track, with 280 hours of flight testing so far.

"I feel very confident about 300 units before entry into service," he said.

So far, Bombardier has 203 firm orders and "we have quite a few very active campaigns" on the sales front, he said.

"We're satisfied with our first-quarter results and we're on track to meet our full-year guidance for 2014," said Mr. Beaudoin.

"We achieved important milestones such as the successful maiden flight of the Learjet 85 in April and we received a record $8-billion of new orders at Bombardier Transportation."

C Series flight testing has now reached the maximum altitude of 12,497 metres – 41,000 feet – and maximum operating speed of Mach 0.82 or 871 kilometres per hour, said Bombardier.

A fourth flight test vehicle – FTV4 – is expected to make its first flight in the coming weeks, said the company.

Also on Thursday, Bombardier Transportation said it has acquired Australian signalling company Rail Signalling Services (RSS), for an undisclosed amount.