May 10, 2012 / 10:59 AM / 5 years ago

Bombardier profit drops; shares rise on outlook

A worker walks past the entrance to the Bombardier plant in Derby, central England, July 5, 2011. REUTERS/Darren Staples

TORONTO (Reuters) - Canada’s Bombardier Inc reported a sharp drop in quarterly sales and profit on Thursday partly because aircraft deliveries dropped but its shares rose as much as 6.5 percent as investors focused on the company’s optimism outlook.

The stock, which had fallen after its results were announced, later reversed direction, gathering speed during an afternoon conference call as the world’s third biggest commercial planemaker stressed that new orders were picking up and its backlog was healthy.

“Management is characterizing the poor result this morning as timing-related and is speaking very optimistically about new orders/deliveries in the balance of the year,” explained RBC Capital Markets analyst Walter Spracklin in an email.

Bombardier’s stock had dropped more than 10 percent in the week leading up to the results.

The Montreal-based plane and train maker, which warned in March that aircraft deliveries would dip in 2012, said on Thursday revenue fell 25 percent as it introduced new aircraft and ramped up deliveries on complex new train orders.

First-quarter profit fell 14 percent to $190 million, or 10 cents a share, from $220 million, or 12 cents a share, a year earlier. Revenue declined 25 percent to $3.5 billion.

While profit matched analysts’ expectations, revenue fell far short of the consensus estimate of $4.52 billion, according to Thomson Reuters I/B/E/S.

“Certainly the results across the board are weak. We weren’t expecting a lot and we didn’t get much,” said PI Financial analyst Chris Murray.

The company said lower revenues were anticipated, but it was able to contain costs to maintain profitability.

PLANE DELIVERIES SLUMP

Bombardier delivered 37 aircraft in the quarter, down from 61 in the same period last year. It took new orders for 68 planes, a drop from 86 last year.

Still, the aerospace unit backlog rose to $23.3 billion from $22 billion, reflecting more orders for large business aircraft, turboprops and commercial jets.

Revenue at the division, which manufactures business, commercial and amphibious aircraft, fell to $1.5 billion from $2.2 billion a year earlier, and its profit margin dropped to 6.1 percent from 6.4 percent.

Sales were hurt by declining deliveries of commercial aircraft and the roll-out of new corporate Global 5000 and 6000 jets with an overhauled cockpit, the company said.

Deliveries will ramp up through the course of 2012, the company said, to 180 business jets and 55 regional aircraft.

Stonecap Securities analyst Scott Rattee highlighted that outlook, and pointed to WestJet Airlines Ltd’s recent announcement that Bombardier will supply up to 45 Q400 turboprop planes for a new regional carrier.

“My expectation is we will see a snap-back in aircraft deliveries over the next few quarters,” he said.

Bombardier, which is also the world’s No. 1 train maker, said train unit sales fell 20 percent to $2 billion as it completed some major contracts in the Asia-Pacific region. The profit margin slipped to 6.2 percent of revenue from 6.9 percent.

The overall plane and train order backlog increased to $55.2 billion at the end of March from $53.9 billion at the end of December.

C-SERIES ON TRACK

Bombardier said it is still targeting a first flight for its much-anticipated C-Series aircraft by the end of the year, a confirmation that analysts say is positive news.

The company is investing $3 billion to develop the 110-seat to 149-seat C-Series, its biggest aircraft yet, but it has met with sluggish demand.

Bombardier competes with Brazil’s Embraer SA in the smaller regional jet market and will take on Airbus and Boeing Co with its new C-Series jet.

In March, Bombardier signed a pact with Commercial Aircraft Corp of China Ltd (Comac) to cooperate on development of the C-Series and Comac’s C919 aircraft. The deal could reduce the cost of research and development, and some parts, while giving Bombardier deeper access to China’s fast-growth market.

The company had $3.2 billion in cash at the end of March, down from $3.4 billion as at December 31.

Shares of Bombardier were up 6.5 percent at C$3.93 on Thursday afternoon on the Toronto Stock Exchange.

($1=$1.00 Canadian)

Additional reporting by Bhaswati Mukhopadhyay in Bangalore and Allison Martell in Toronto; Editing by Frank McGurty; and Peter Galloway

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