Bombardier ‘firing on all cylinders’
Bombardier surprised the market yesterday as it posted higher-than-expected revenue of $1.85bn (adjusted EPS of $0.73). This growth in revenues was driven by better prices and higher operation efficiencies.
“I have to say, that was one heck of a quarter we just had. When I take a step back and look at what we accomplished, our business is firing on all cylinders,” said Bart Demosky, chief finance officier, Bombardier on the earnings call. The company outperformed on all metrics: revenue, cashflow, EBIDTA and business jet deliveries.
The Quebec-based jet manufacturer said the fourth quarter is already well underway. “Overall, we have a good line of sight for the fourth quarter and everything is in place to deliver greater than 56 aircraft with some already behind us,” said CEO Eric Matel. This will take the company’s full-year jet deliveries to 138, with 82 delivered already in first nine months.
Bombardier is set to achieve nearly one-fourth of the global business jet market share if it is successful in delivering 138 jets by the year end.
“It’s a very strong quarter, typically, because we tend to have a lot of deliveries in the fourth quarter. This quarter is even higher than some quarters in the past, and so that’s setting us up very well too,” said Demosky.
This should drive strong cash flow in the fourth quarter at $639m. “Our cash usage over the past nine months, was largely driven by inventory ramp up for, which we expect to see a significant release in the fourth quarter, as we deliver more than 56 aircraft,” he added.
The company’s backlog also remains strong at $14.7bn in line with the average in past four quarters. This essentially means the company has an orderbook averaging 18-24 months.
High interest rates, rising costs and negative sentiment remain top risks for business jets market. But Martel says he sees no signs of a slowdown in demand including the fleet operators. “We’ve seen no impact whatsoever in terms of fleet operators being able to raise capital. Whether that be through equity, through cash flow generation, or through access to the debt markets, we continue to see very strong fleet activity.”
“In fact, it’s more of a growth story for the fleet operators and we’re very pleased to be partnering with them. No signs of pulling back. In fact … a group … said that they’re deploying more capital into business aviation, because it’s been high performing for them.”
However, Robert Stallard at Vertical Research says: “All the bizjet OEMs have now confirmed that new bizjet demand remained resilient in Q3, even with concerns over the impact of the ‘higher for longer’ interest rate environment.”
“The interesting tussle between negative investor sentiment and bizjet fundamentals has been won by the bizjet OEMs this quarter, but we’d be wary of declaring any victory yet.”