Bombardier First-Quarter Net Falls 16% on Jet Deliveries
Bombardier Inc. (BBD/B), the world’s biggest maker of business jets by revenue, said first-quarter profit fell 16 percent as the company delivered fewer of its large-cabin Global 5000 and 6000 aircraft.
Net income dropped to $185 million, or 10 cents a share, from $220 million, or 12 cents, a year earlier, Montreal-based Bombardier said today in a statement. Sales declined 25 percent to $3.51 billion, trailing the average analysts’ estimate of $4.5 billion.
Bombardier began outfitting its Global business jets with new cockpit equipment in late March, delaying deliveries of some planes. With a list price of about $50 million, the Global jets are the most important contributors to Bombardier’s aerospace profit, Joe Nadol, an analyst at JPMorgan in New York, said in a note to clients published May 7.
Most of the drop in revenue and profit “is due to timing issues,” Fadi Chamoun, an analyst with BMO Capital Markets in Toronto, said today in a note to clients. “Order levels continue to be robust. We view the pullback as a buying opportunity.”
Chamoun has an outperform rating, a type of buy recommendation, on Bombardier. The Class B shares rose 7.3 percent, the most since Oct. 28, to C$3.96 at the close in Toronto. Cameron Doerksen, an analyst at National Bank Financial in Montreal, raised his rating to outperform from sector perform.
Customers took delivery of 37 aircraft in the quarter, compared with 61 planes a year earlier. Bombardier shipped seven commercial aircraft, down from 23 regional jets and turboprops in last year’s first quarter. Business jet deliveries dropped 22 percent to 29 units.
“The entry into service of the Vision Flight Deck on the Global 5000 and Global 6000 aircraft and the resulting transition, as well as lower deliveries of commercial aircraft, had an impact on our revenues,” Chief Executive Officer Pierre Beaudoin said in today’s statement. “Nevertheless, we were able to contain costs and maintain our profitability.”
Bombardier said March 1 it expects deliveries to drop to 235 this year from 245 in calendar 2011. Business aircraft will make up the bulk of shipments, with 180 business planes delivered, compared with 55 commercial aircraft.
“Now that Bombardier is delivering aircraft with the new cockpit, we see deliveries ramping,” said Nadol, who has an overweight recommendation on the stock, the equivalent of buy. “Demand for Globals is solid and production rates are rising, which gives us confidence in the growth we are forecasting despite the slow start.”
Nadol said he expects Bombardier to ship 59 Global business jets this year, an 11 percent increase over last year’s total.
Net orders declined 21 percent to 68 units in the quarter. Bombardier sold 40 business jets, down from 77 a year ago. It also sold 28 commercial aircraft, up from five a year ago.
Bombardier switched to calendar-year reporting in 2011 from a fiscal year that ended Jan. 31. That means this year’s first quarter ended on March 31, while the year-earlier period ran from Feb. 1 through April 30, 2011.
Free cash flow usage soared 74 percent to $712 million in the first quarter, the company said. Bombardier is working to meet a 2013 target for entry into service of the CSeries jetliner, its largest plane, which is costing about $3.5 billion to develop.
Earnings before interest and taxes fell to 6.1 percent of revenue from 6.7 percent a year earlier, Bombardier said today. Profit dropped to 6.1 percent of sales from 6.4 percent at the aerospace unit, and to 6.2 percent from 6.9 percent in the rail business.
“We’re in an excellent position in the rail transportation market,” Beaudoin said, after rail accounted for more than half of revenue and pretax earnings in the quarter. Bombardier received an order for 16 four-car double-decker trains from Deutsche Bahn AG earlier this year.
Bombardier had $55.2 billion of future orders in its backlog as of March 31, down from $53.9 billion a year earlier. Its rail unit booked $1.2 billion of new contracts in the first quarter, boosting its backlog to $31.9 billion at the end of March.
Separately, Bombardier said its board yesterday approved a plan to buy back as much as 5 percent of outstanding Class A and Class B stock after June 16.
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