Analysts expect Bombarider shares could soar around 2015
March 1, 2010, Montreal - A transportation analyst expects plane and train maker
Bombardier's shares could nearly double in value over the next five years as its aerospace business recovers and hits its stride and the railway segment delivers improved profitability.
March 3, 2010 By The Canadian Press
Bombardier stock could rise to $11.92 in a "normalized year'' — higher than they have been in more than a decade by around 2015, according to Walter Spracklin of RBC Capital Markets.
The last time the shares reached that level was in 2002, but continued fears of transportation disruption following the prior year's terrorist attacks in the United States dragged heavily on trading.
Spracklin said he sees significant upside for the Montreal-based company's shares during an economic recovery and raised his one-year target by $1 per share to $7.50.
He is believed to be the first analyst to offer a long-term double-digit target for Bombardier's stock. But others have also increased their near-term targets following a recent order by Republic Airlines for 40 CSeries aircraft and an option for 40 more.
The total value of the deal if options are exercised could be more than US$6.3 billion, based on list prices.
Bombardier shares gained five cents to $5.95 in morning trading on the Toronto Stock Exchange.
The flight path to nearly $12 reflects an estimated earnings of 85 cents US per share for the company. It assumes 350 aircraft deliveries, 11 per cent aerospace margins, a transportation backlog of US$26 billion and railway margins of eight per cent, two
percentage points higher than current levels.
Spracklin said the low value of Bombardier's shares resulting from its position as a laggard of the recession has created an investment opportunity once new orders emerge.
Among them would be interest in the new CSeries regional jet, which is slated to enter into service in 2013.