Bombardier & Ballard Power: 2 Industrials Stocks On Investors’ Radar

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Bombardier & Ballard Power: 2 Industrials Stocks On Investors’ Radar

 Bombardier & Ballard Power: 2 Industrials Stocks On Investors’ Radar

Summary

  • Industrials sector has performed well on the TSX this year with the capped index advancing by 3.4 per cent YTD.
  • Industrial stocks such as Bombardier (TSX: BBD), Air Canada (TSX: AC), and Ballard Power Systems (TSX: BLDP) are trending on the index.
  • Bombardier stocks have been struggling amid pandemic, losing nearly 79 per cent of its value this year.
  • Ballard stocks, on the other hand, are rising on the back of accelerated demand for cleantech technologies across the world.

Bombardier (TSX: BBD) and Ballard Power Systems (TSX: BLDP) are two stocks that have piqued investors’ interest amid pandemic times. These two stocks, trading on the Toronto Stock Exchange (TSX), are from industrials segment, which has performed well in the first half of 2020. The S&P/TSX Capped Industrials Index has advanced by 3.4 per cent year-to-date (YTD). In contrast, the key S&P/TSX Composite Index has declined by nearly four per cent in the same time frame. Some of the other trending industrial stocks are Air Canada (TSX: AC), Canadian National Railway Company (TSX: CNR), Waste Connections (TSX: WCN) and Canadian Pacific Railway Limited (TSX: CP).

Let us look at the individual stock performances of Blackberry and Ballard Power Systems and decipher the trending factors.

Bombardier Inc (TSX: BBD.B)

Bombardier produced jets and rail coaches run across multiple geographies across the world. But this leading manufacturing giant has been shuffling through difficult times even before COVID-19 came into the picture.

Bombardier is staring at a debt of US$ 9 million, against annual revenues of US $15 billion in the second quarter of 2020. To write off the debt, Bombardier sold its rail business to French firm Alstom in a US$ 4.5 billion-deal earlier this year. It further shelved the dividends and sought financial support from state and federal.

Bombardier posted an adjusted EBITDA loss of US$ 319 million for the quarter. The company suffered a direct disruption costs of approximately US$ 75 million due to the pandemic. It ended the quarter with cash and cash equivalents of US$ 1.7 billion. This included transportation revolving credit facility of US$ 1.3 billion and a secured term loan of up to US$ 1.0 billion.

At the start of the 2020, Bombardier shares were trading at C$ 1.93. At the time of filing this story, the stock price is down to C$ 0.41. The scrips have shelved nearly 79 per cent of its value this year. In the last three months, the Bombardier stocks declined by 29 per cent. However, the stocks are mostly trending flat in the last one month.

Faced with harsh circumstances, the manufacturer slashed its workforce, letting go of 2,500 employees after its business jet deliveries were down approximately 30 per cent year-over-year due to the pandemic restrictions on aviation industry. Most of the reductions were carried out in Canada.

The company cancelled the Learjet 85 aircraft program and sold its Q and C Series Aircraft programs. It further closed the sale of the CRJ Series aircraft program to Mitsubishi Heavy Industries for US$ 575 million. The Belfast and Casablanca aerostructures businesses and Dallas MRO (maintenance, repair and overhaul) were sold to Spirit AeroSystems for a cash consideration of $500 million and assumption of overall liabilities.

While the future for the aviation segment looks bleak, Bombardier in its latest forecast shared a resilient outlook for transportation segment with several orders across geographies.

Ballard Power Systems Inc (TSX: BLDP)

Ballard stocks has performed well amid pandemic, its scrips advancing by over 100 per cent year-to-date. The stocks have yielded nearly 15 per cent returns in the last three months.

This Canadian industrial stock has done well in the current economic environment that pushes for more innovations in cleantech segment as the country eyes zero emissions target by 2050. Ballard deals in production and development of fuel cell products. These proton exchange membrane (PEM) cells are being developed for next-gen electric vehicles.

In its second quarter 2020 results (ending June 30, 2020), Ballard Power System’s revenue was US$ 25.8 million, up nine per cent year-over-year. It ended the quarter with cash reserves of US$ 170.3 million, an increase of four per cent the end of Q2 2019. It also raised an additional US$ 12.2 million cash through at-the-market equity program.

Ballard’s Q2 Financial Snapshot

(Source: Ballard Power Systems)

Most of Ballard’s revenues comes from China, where it deployed zero-emission vehicles including transit buses and commercial vehicles. It has partnered with local companies such as Zhongshan Broad-Ocean Motor and Guangdong Nation-Synergy Hydrogen Power Technology.

Ballard is also working on fuel cell electric buses orders from Wrightbus in the United Kingdom and has a Memorandum of Understanding to establish the H2OzBus Projects in 10 central locations across Australia. The company also has presence in the United States, Europe and Japan.

Ballard recently announced the launch of the zero-emission fuel cells for primary propulsion power inclin marine vessels.

In a report jointly development with consultancy firm Deloitte, Ballard claims it will be more cost-effective and commercially viable to run a fuel cell electric vehicle in the next decade than a battery electric vehicle or internal combustion engine vehicle.

Ballard stocks are currently trading at C$ 18.81 on the TSX.

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