Goldman Sachs upgrades Bombardier on ‘impressive’ operational turnaround

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CEO Alain Bellemare, who took the reins at Bombardier in February 2015, is executing an ‘impressive’ turnaround, Goldman Sachs says.Canadian Press

Shares of Bombardier Inc. were up 3 per cent on Monday morning after an upgrade from Goldman Sachs. The U.S. investment bank resumed coverage with a buy rating and a price target of $7. Shares currently trade around $5.

Analyst Noah Poponak cited an “impressive” operational turnaround led by CEO Alain Bellemare, who took the reins at Bombardier in February 2015.

“Bombardier is executing on its turnaround, driving meaningful margin improvement, revenue growth, and free cash,” Poponak wrote. “New management has beat consensus EBIT all 9 quarters since taking over. We see room for margins to go higher.”

Shares of Bombardier are up 60 per cent year to date. Poponak suggests the company is on track to quickly deleverage — from 6.3x EBITDA to 1.7x by 2020 — as orders pick up for upgraded business jets and for its C-Series narrow-body jetliners, particularly after the company closed its deal with Airbus SE.

On June 8, the European aeronautics giant finalized its agreement to take over the beleaguered C-Series line. The deal will move manufacturing to the Mobile, Alabama, in order to avoid U.S. tariffs.

Goldman Sachs’ upgrade comes on the heels of an upgrade from Kevin Chiang at CIBC World Markets, to outperform from neutral, with a price target of $6.

Bombardier has 17 buys, five holds and no sells, with a consensus price target of $5.26, according to analysts surveyed by Bloomberg.

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