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Analysts downgrade Bombradier due to weak Q3

Nov. 2, 2012, Montreal - Bombardier is expected to post soft third-quarter results next week, prompting at least one analyst to downgrade his rating for the plane and train manufacturer and trim his share target price.


November 2, 2012
By The Canadian Press

Analysts on average expect that the Montreal-based plane and train manufacturer will earn 11 cents per share in adjusted profits
on US$4.68 billion of revenues when results are released Nov. 7.

But Cameron Doerksen of National Bank Financial is more pessimistic. He has trimmed his price target by 25 cents to $4.25 due to lower sales of Challenger business aircraft and regional jets, increasing risk of a delay in the first flight of the CSeries and a possible one-year delay in the railway division reaching its targeted profit margin.

The analyst sees longer term upside for Bombardier, but is concerned about the shorter term.

Doerksen forecasts that Bombardier delivered 61 planes in the quarter, including 46 business jets, 14 regional aircraft and one
amphibious plane. That's down from 68 aircraft a year ago. The quarters don't align because Bombardier changed its year-end to coincide with the calendar.

Recent data on used business jet inventories and aircraft usage suggest the market for corporate jets is fairly stagnant. Large
Global aircraft orders and deliveries are strong, but he said the mid-sized market has "stalled'' and the light business jet markets
remains "quite weak.''

Doerksen also raised concerns that ongoing aircraft development programs could drain free cash later in the decade and remain
"depressed for the foreseeable future.''

Walter Spracklin of RBC Capital Markets has maintained his rating and target price for Bombardier at $5 but also voiced concerns about the upcoming results in a recent report.

Although the aerospace division announced US$6 billion worth of orders in the quarter, he worries that the transportation division
will underperform for the third quarter in a row.

Spracklin expects the CSeries first flight will be delayed until the first half of 2013. Achieving that timing would be a significant
catalyst on reducing the program's risk and paving the way for new orders, he wrote in a report.