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Author: jammerh Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2881  
Subject: BBD - The Report From VLine Date: 9/19/2012 5:14 PM
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As usual with each Valuline installment I try to get a few "excerpts" of it posted online. We probably get it earlier here than most places and it isn't much trouble to share.

Value Line is expensive. Most larger public libraries get it, but you usually have to ask for it at the reference desk (kept in a big, green, or black binder). Reports come in weekly, but they only get around to covering the Aerospace and Defense sector (where Bombardier's report comes (right after Boeing).

If your public library doesn't carry it they'll at least be able to tell you the closest library that does. I usually try to catch these when they first arrive and make photocopies of the ones I want to study. I should add that Value Line's view (at least currently) corresponds closely to my own although I never realized they had such a propensity for the word "Nevertheless", (nor I for putting things in brackets).

So, without further ado here are a few of the points I think are important in the report.

Bombardier is rated as a pretty average hold on scores of Timliness, Safety, and "Technical". Sales are estimated to come in around $9.50 a share for 2012, $11.00 in 2013, and $14.45 in the stretch out over the next 3-to-5 years (15-17).

Excerpted from the text of the report:

"In a reversal of recent trends, sales slipped at Bombardier's Transportation unit, while Aerospace revenue picked up thanks to greater business jet demand. Unfortunately profit margins deteriorated in both segments. Nevertheless, we see the pickup in sales at Aerospace as a good sign for future profitability in that segment. volume should increase with the introduction of the new CSeries mid-sized jet.

For now we expect earnings to continue to stagnate in the third quarter as Transportation remains in a lull and Aerospace sees more expenses for future projects. Management expects things to pick up by the fourth quarter, so we are maintaining our 2012 share-net estimate of $0.45.

Next year still looks brighter. CSeris development may be delayed by three to five months, likely pushing its launch into 2013, we assume. Our outlook for this period is largely unchanged, with stronger growth in both segments next year. Orders for new planes are heartening so far, including orders from jet-sharing company NetJets. We expect the company to take on more debt to continue its recently high levels of capex.

Bombardier remains highly leveraged. Debt levels have been gradually climbing. Meanwhile prospects for free cash to pay down this debt, after distributing dividends and investing in capital remain dim for now. Nevertheless, with the launch of the CSeries and expected gradual growth in Transportation, we forsee enough cash for the company to start paying down debt during the 2015-2017 period. In light of these catalysts, we still expect more-attractive earnings and valuations mid-decade. Our share-net estimate for 2015-2017 remains at $0.80. This leads us to reaffirm our outlook for above-average capital appreciation here.

Untimely Bombardier stock is down another 5% since our June report. Relative to other companies' valuations in the aerospace industry (such as Boeing, and Embraer), this issue's valuation is becoming increasingly attractive. Nevetheless, investors will require further patience as CSeries development is already seeing turbulence in initial stages.

September 14, 2012

Company's financial strength B

Stock's Price Stability 50

Price Growth Persistence 35

Earnings Predictability 50
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