Bombardier (TSX:BBD) & Air Canada (TSX:AC): 2 Trending Industrial Stocks

Value of industrial stocks Air Canada (TSX: AC) and Bombardier Inc (TSX: BBD.B) spiked following the announcement of successful COVID-19 vaccine trials by Pfizer-BioNTech and Moderna earlier this month.

The industrial sector took quite a hit amid the pandemic as operations and productions came to a halt due to lockdown protocols. While the hope of a possible coronavirus vaccine is drawing investors’ attention to riskier stocks, the looming impact of a second wave of infections continue to stir caution. The S&P/TSX Capped Industrials Index is up about 13 per cent this year.

Let’s take a look at the stock of Air Canada and Bombardier to understand their performances.

Air Canada (TSX: AC)

Current Stock Price: C$ 21.01

Stocks of Air Canada are up nearly 43 per cent in November. Following the Pfizer news on November 9, the scrips shot up about 33 per cent in less than two weeks’ time.

Needless to say, the aviation industry took quite a beating this year as the coronavirus pandemic disrupted domestic and international air travel. Shares of the top Canadian carrier nosedived 73 per cent in one month’s time between February and March 19^, 2020.

However, its stocks have gained almost 24 per cent in the last six months and nearly 30 per cent in the last three months.

Air Canada’s YTD price chart (Source: Refinitiv, Thomson Reuters)

Air Canada, along with fellow airline WestJet, recently signed a deal with the state of Hawaii that allows flyers travelling to the islands to skip the compulsory quarantine period of 14 days. The deal, however, mandate that the two airlines offers COVID-19 tests for all guests before they board the flight.

Air Canada CEO Calin Rovinescu announced this month the airline would be offering refunds for cancelled flights in exchange for government aids, said media reports. So far this year, Air Canada paid back over C$1.2 billion in refunds, though it did not return the money for non-refundable tickets.

AIR CANADA Q3 2020 RESULTS

Even as air travel in Canada took a slow restart post lockdown, Air Canada’s total revenue in the third quarter of 2020 doffed 86 per cent year-over-year (YoY), amounting to C$ 757 million. Its EBITDA stood at a C$ 554 million, while it incurred an operating loss of C$ 785 million in Q3 2020.

The airline’s total revenue passengers carried in the third quarter, ending 30 September 2020, declined 88 per cent year over year. Its unrestricted liquidity at the end of the quarter stood at C$ 8.189 billion.

Since the pandemic kicked in March 2020, Air Canada raised nearly C$ 6 billion in additional liquidity. The company said that it has reduced its workforce by 20,000 jobs and cut down its capacity by more than 80 per cent in the third quarter.

Bombardier Inc (TSX: BBD.B)

Current Stock Price: C$ 0.385

Bombardier Transportation recently got a contract worth US$ 248 million from the China State Railway Group Co for the delivery of 112 CR300AF high-speed train cars. The deal technically went to the company’s joint venture Bombardier Sifang (Qingdao) Transportation Ltd, and all the 112 cars are expected to be delivered by January 2021.

While its rail equipment segment continues, Bombardier aerostructure business came to an end after its deal with Spirit AeroSystems Holding Inc (NYSE: SPR) finally closed on 30 October 2020. The total transaction value of the deal was around US$ 1.2 billion.

Like most industrial companies, stocks of Bombardier also plunged during the pandemic-triggered March lows. The shares lost their value by 80 per cent this year, and by 23 per cent in the last six months.

In the last three months too, they dropped by nearly four per cent. But in November, Bombardier scrips picked to record a gain of about 37 per cent.

Bombardier stocks have registered increased trading in the midst of the coronavirus pandemic. The company accumulated a share movement volume of 9.34 million in the last 10 days and of 5.92 million in the past month. 

BOMBARDIER INC Q3 2020 RESULTS

The impact of the COVID-19 pandemic reflected on Bombardier’s third quarter results of 2020. The Canadian transportation equipment manufacturer posted total revenues of US$ 3.5 billion in Q3 2020 (ending 30 September 2020), down by five per cent YoY due to “pandemic-related disruptions and divestitures”.

Its revenues from business aircraft manufacturing activities, however, climbed by 20 per cent YoY, amounting to US$ 1.4 billion in Q3 2020. Its total adjusted EBITDA in the latest quarter stood at US$ 176 million.

Bombardier recorded a free cash flow usage of about US$ 0.7 billion at the end of the third quarter, while its operating cash flow usage stood at US$ 0.6 billion.

The company reported that it had about US$ 1.9 billion cash on hand and some US$ 275 million from the recently completed sale of its aerostructures business.

Bombardier reported in its latest financial results that its service and support network continued to expand in the third quarter. The company entered an international deal to build a wholly-owned service centre in Berlin and completed the acquisition of Lufthansa Bombardier Aviation Services (LBAS).

The sale of Bombardier’s transportation segment to French manufacturer Alstom SA is expected to be completed by the first quarter of 2021, the company said. With the closure of deal, Bombardier will transition to a “pure-play business aircraft company”.