Bombardier Keeps First-Flight Goal as CSeries Aces Tests
Bombardier Inc. (BBD/B) stuck to its goal of first takeoff for the CSeries in June after the delayed jetliner performed well on flight-safety tests that included bending the wings to gauge structural integrity.
The planemaker said in a first-quarter earnings report today that it has begun a “critical” series of tests on the fly-by-wire cockpit control system. The CSeries previously responded “as expected” on evaluations of areas crucial to a flight-safety permit, including static airframe testing and on-the-ground checks, Bombardier said in a filing.
Chief Executive Pierre Beaudoin’s confidence at such a late stage in the testing is “a good sign,” said Cameron Doerksen, an analyst at National Bank Financial in Montreal. It may help dispel investor pessimism after a six-month postponement in November coupled with the struggles by larger rivals Airbus SAS and Boeing Co. in developing brand new planes.
Bombardier had a CSeries backlog of 145 firm orders as of March 31, the Montreal-based company said as it reported first-quarter profit in line with analysts’ estimates. Bombardier is targeting 300 firm orders by the time the plane enters commercial service in mid-2014 and expects the aircraft to help almost double annual revenue in the next decade.
Bombardier’s reaffirmation of the June goal for first flight “is the key near-term catalyst,” Walter Spracklin, an analyst at RBC Capital Markets in Toronto. “This will continue to help to lift sentiment, particularly if it is matched with new orders going into the Paris Air Show next month.”
Bombardier’s Class B shares rose 3.1 percent to C$4.36 at 9:35 a.m. in Toronto. The stock previously gained about 13 percent this year, beating the 1.2 percent gain of the Standard & Poor’s/TSX Composite Index.
The CSeries will be Bombardier’s biggest-ever plane and has a total development cost of about $3.4 billion. The aircraft, which will feature the new geared turbofan engine from United Technologies Corp. (UTX)’s Pratt & Whitney, will be about four times quieter than existing jets and cost about 15 percent less to operate, the company has said.
The backlog reflects the termination of an order for three CSeries jets from an undisclosed buyer “due to financial difficulties of the customer,” Bombardier said. The customer also had options for three more planes.
The delay in first flight, announced in November, followed unspecified issues with suppliers and mirrored challenges encountered by Airbus and Boeing. The Chicago-based planemaker delivered its 787 Dreamliner more than three years behind schedule, then grappled with a three-month grounding by regulators because of overheating batteries.
Airbus’s A380 jumbo jet was almost three years late in initial deliveries, while its A350-900 model is already 18 months behind schedule.
“Many investors and customers remain skeptical given one previous delay and the broader sector’s development fumbles in recent years,” Steve Hansen, an analyst at Raymond James Ltd. in Vancouver, said May 6 in a note to clients. He rates the shares outperform, as do National Bank’s Doerksen and RBC Capital’s Spracklin.
Excluding some costs and gains, profit in the three months through March rose to $156 million from $150 million a year earlier, Bombardier said. That’s in line with the average estimate in a Bloomberg survey of 20 analysts. Revenue soared 25 percent to $4.34 billion, beating the average estimate of $4.16 billion.
Bombardier delivered 53 planes in the first quarter, 43 percent more than in the same period a year ago. The total includes 39 business jets, up from 29.
Bombardier reiterated a February target for aircraft deliveries in 2013 to increase to 245 from 233 last year. The full-year goal includes 190 business jets and 55 regional planes.
Earnings before interest and taxes for the aerospace unit amounted to 4.5 percent of revenue in the quarter, compared with 6.7 percent for the aerospace division. On the same basis and excluding one-time items, aerospace profit will climb to 6 percent of revenue by 2014, while the train business’s margin will reach 8 percent, Bombardier said today.
Bombardier’s backlog of orders fell to $63 billion at the end of March from $64.9 billion three months earlier, the company said today.
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