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Bombardier (TSX.BBD) has been on a remarkable upward trajectory, showcasing a stellar performance that has significantly outpaced the broader market in 2024. With its stock surging by 46.3% in May alone and boasting a year-to-date increase of 65%, compared to a mere 4.4% gain in the TSX Composite benchmark, many investors are understandably curious about its future prospects as a potential investment, particularly among TSX industrial stocks.
Reasons Behind Bombardier's May Surge
The surge in Bombardier's stock price during May 2024 can be attributed to several pivotal developments that underscored the company's strategic initiatives and operational strength. One of the key drivers was a substantial order from NetJets for 12 Challenger 3500 aircraft, with options for an additional 232 jets. This deal, valued at over US$6 billion assuming full option exercise, highlighted strong demand for Bombardier's aircraft and reinforced its longstanding relationship with a major client.
Additionally, Bombardier's Investor Day in early May provided further momentum. The event reaffirmed the company's commitment to achieving its ambitious 2025 objectives through continuous product enhancements and expansion into lucrative business segments.
Further bolstering investor confidence were initiatives such as the launch of the Aviator Lounge in Monaco and the establishment of a new Bombardier Defense office in Australia. These moves underscore Bombardier's dedication to enhancing customer experience and expanding its global footprint, complemented by strategic debt refinancing through the issuance of new senior notes to fortify its financial position.
Is Bombardier Stock Still a Viable Investment?
Despite its recent impressive performance, prospective investors might wonder whether Bombardier stock remains a prudent buy. Beyond the recent positive catalysts, the company has demonstrated consistent improvement in its financial metrics over recent years.
In 2023, despite facing macroeconomic challenges like inflation and higher interest rates, Bombardier reported a robust 16.4% year-over-year increase in total revenue to US$8 billion. Moreover, its adjusted EBITDA surged by 32.3% year-over-year to US$1.2 billion, indicating significant operational efficiency gains.
The momentum has carried into 2024, with Bombardier reporting a further expansion in adjusted EBITDA margin to 16% from 14.6% the previous year. Notably, the company's order intake in the first quarter soared by 60% year-over-year, resulting in a substantial US$700 million rise in backlog to US$14.9 billion. The strong unit book-to-bill ratio of 1.6 underscores robust demand for Bombardier's aircraft, underpinning its growth trajectory.
Looking ahead, Bombardier's prospects appear promising, supported by its strategic focus on expanding service revenues, disciplined debt management, and leveraging its strong backlog to drive aircraft deliveries. These factors collectively position Bombardier favorably for continued growth and potential stock appreciation in the foreseeable future.
While Bombardier's recent surge may give some pause, its solid financial performance and strategic initiatives suggest it remains an attractive investment opportunity for those bullish on the aerospace sector and long-term growth prospects.
