Goldman cuts price target on Bombardier; sees further CSeries delay
TORONTO, Sept 2 (Reuters) - Goldman Sachs cut its price target on Bombardier Inc and reiterated a "sell" rating on shares of the train and plane maker on Tuesday, warning it expected the CSeries aircraft's entry into service to be delayed again.
Goldman's price cut came just days after a Swedish carrier backed out as the first customer to start commercial flights with its new CSeries jet.
Malmo Aviation, owned by Sweden's Braathens Aviation, was slated to be the first CSeries customer to take delivery of the new jet in the second half of 2015, but the airline said on Friday that will no longer be the case. It cited worries about further delays after a May engine failure grounded the jets.
"We believe the CSeries will negatively impact Bombardier's financial results and create negative catalysts for the next several years," Goldman analyst Noah Poponak said in a note to clients.
Poponak reiterated the "sell" rating and trimmed his price target to C$3 from C$3.20.
The CSeries aircraft, which will compete with Boeing Co's 737 MAX as well as the Airbus A320neo, has been grounded for more than three months. Bombardier, following an initial test flight in September 2013, had earmarked roughly two years for testing after a delay in the development process.
Poponak said the aircraft has completed just 330 hours of flight testing since its first flight, out of a planned 2,400 total hours, meaning Bombardier has achieved less than 15 percent of planned flight test hours, while using nearly half of the time it had allotted toward testing.
He contended if flight tests resumed in September, Bombardier would need to complete an average of about 160 test flight hours per month to achieve the currently planned second half of 2015 entry into service.
"We see that as very unlikely given the pace achieved before grounding, momentum (not just time) lost during grounding, and the high risk of new problems occurring other than this engine incident," said Poponak.
Shares in Bombardier closed more than 3 percent lower at C$3.66 on Friday on the Toronto Stock Exchange after the Swedish carrier said it was backing out. (Reporting by Euan Rocha; Editing by Jeffrey Benkoe)
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