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Bombardier's C Series passenger jet (CP)
Bombardier's C Series passenger jet (CP)

Eye on Equities

Bombardier faces critical juncture at Paris Air Show Add to ...

While Bombardier Inc. will report its first-quarter results one week from today, it could be just a warm-up to the main event for investors: The Paris Air Show next month.

The Montreal-based transportation giant is under considerable pressure to announce sales during the show for its new C Series single-aisle jet. Coming away empty-handed from the June 20-26 event could mean a rough ride for shareholders.

"We believe that the most important near-term catalyst for the stock is orders (or lack thereof) for the C Series," National Bank Financial analyst Cameron Doerksen said in a research note today.

So far, Bombardier has lined up only three customers, for a total of 90 firm orders and options on another 90. It has not booked any new orders since February, 2010.

Bombardier management has expressed plenty of confidence that it will secure new orders. But if it doesn't, "we would expect the stock to drift lower," he said.

"We also suspect that an order beyond the on-again, off-again order from Qatar Airways (which we think is back on) at Paris may be required to give the market renewed confidence in the C Series program and push the stock higher."

The first flight for the C Series is expected by late 2012 and initial deliveries by late 2013.

Providing Bombardier has some good news to report at the show, Mr. Doerksen - who is forecasting first-quarter revenue of $4.2-billion and earnings per share of 7 cents - sees a lot of encouraging signs for the company.

"We believe that the stock will continue to benefit from a rebound in the business jet sector, strong order flow and gradual margin improvement in the transportation division, and potentially from new orders for the C Series," he said.

Upside: Mr. Doerksen raised his price target by 50 cents to $8.50 and maintained an "outperform" rating.

Capstone Mining Corp. reported adjusted first-quarter earnings per share of 8 cents, only about half of the consensus estimate, due mostly to above-average depreciation expenses. But Capstone has maintained its full-year production guidance of 80 to 85 million pounds of copper and TD Newcrest analyst Craig Miller upgraded the stock to "buy" from "hold" due to its recent price weakness.

Upside: Mr. Miller affirmed his $4.75 price target.

Semiconductor company Spreadtrum Communications should continue to win market share for its 2G chipset solutions in emerging markets such as India and Latin America, said Canaccord Genuity analyst T. Michael Walkley. While noting long-term concerns such as intense pricing pressure and increasing competition from larger original equipment manufacturers, he believes the company's shares are attractive at current levels.

Upside: Mr. Walkley upgraded Spreadtrum to a "buy" and raised his price target by $1 to $29.

Genivar Inc. first-quarter earnings fell short of consensus forecasts, and second-quarter results are likely to be similarly weak as infrastructure spending in Quebec slows amid the end of the stimulus program, said CIBC World Markets Inc. analyst Paul Lechem. Looking further out, the engineering services firm should benefit from work force cuts in Quebec, strong private markets, and acquisitions, he said.

Downside: Mr. Lechem cut his price target by $1.50 to $32.50, although he maintained his "sector outperformer" rating.

The first quarter was weak for the solar sector overall, but Canadian Solar Inc.'s performance "seemed unusually messy," commented Canaccord Genuity analyst Jonathan Dorsheimer. The company saw a large increase in debt as well as forex and derivative losses, and reported it is shipping significant volumes in the second quarter that will not be recognized until later in the year.

Downside: Mr. Dorsheimer cut his price target to $10 and maintained a "buy" rating.


Follow Darcy Keith on Twitter for more of the latest analyst actions from the Street and exclusive investing news from The Globe and Mail.

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