(Reuters) - Canadian plane and train maker Bombardier Inc (BBDb.TO) said the timing of major train contracts hurt revenue and profit in the second quarter as big projects wrapped up in Asia and Europe, while new orders were still in start-up phase.
Shares of the Montreal-based company, whose quarterly revenue lagged analysts' expectations, dropped as much as 4 percent before rebounding modestly.
"The market will be slightly disappointed with these results, especially at (train unit) BT," National Bank Financial analyst Cameron Doerksen said, who described Bombardier's new C-Series plane as the most important driver for the share price.
"We are not overly concerned, however, as the strong (train) backlog will support higher revenue and margins in the coming years."
Bombardier, the world's third-biggest plane maker, said it continues to plan for a first flight of its new C-Series jetliner in December, but would consider itself on schedule if that occurred within three to five months of its target.
"I'll repeat what I've always said for the last three years, we target the flight at the end of year. This can play three to five months and I would consider that on time. But the focus of our team is to fly at the end of the year," Chief Executive Pierre Beaudoin said on a conference call.
Investors and analysts are scrutinizing the timetable because of chronic development delays in the aircraft industry.
Bombardier is investing $3.3 billion to develop the 110- to 149-seat C-Series, its biggest aircraft yet. It is currently testing plane systems and targeting a 2013 entry into service.
"Slippage of three to five months for a five-year project of this order of magnitude, to me, would be a successful project," said RBC Capital Markets analyst Walter Spracklin, noting that Beaudoin has repeatedly said the December target has a cushion.
"What you want to avoid is a Boeing Dreamliner, where it was two-three years delayed and a massive cost overrun."
It also said work on the two first flight-test Learjet 85 aircraft and the ground test platform is "well underway".
Bombardier stood by its full-year forecasts despite a 12-percent drop in quarterly revenue, as train division declines outweighed strong aerospace results.
It expects 2012 full-year revenue to match last year's, an outlook that implies a 19 percent increase in sales in the second half, said BMO Capital Markets analyst Fadi Chamoun.
The company repeated its forecast for deliveries of 180 business jets and 55 commercial aircraft in 2012 with an overall EBIT margin of about 5 percent.
But Spracklin said it will be challenging for Bombardier, the world's largest passenger train maker, to rebound quickly enough to make up for a weak first half of the year.
Doerksen, who cut his 12-month stock target to C$4.50 from C$5, said Bombardier may push out the target for its train unit to reach an 8 percent profit margin to 2014 from 2013.
Second-quarter profit fell to $182 million, or 10 cents per share, from $211 million, or 12 cents a share, a year earlier.
Revenue declined to $4.17 billion from $4.7 billion.
Analysts had expected earnings of 10 cents a share and revenue of $4.58 billion, according to Thomson Reuters I/B/E/S.
The total order backlog rose to $56.9 billion as of June 30, from $53.9 billion at the close of 2011.
Quarterly revenue from the company's train unit slumped 30 percent to $1.9 billion, as existing contracts neared completion. The train order backlog dipped to $31.7 billion from $31.9 billion, reflecting a stronger Canadian dollar.
The unit's closely watched EBIT margin, or earnings before financing expense, financing income and income taxes, fell to 6.2 percent from 7.2 percent.
Revenue from the aerospace division, which makes business, commercial and amphibious aircraft, rose 10 percent to $2.3 billion as plane deliveries rose to 62 from 56.
The unit, which delivered more business aircraft but fewer regional jets, increased its backlog by 14.5 percent to C$25.2 billion from the end of 2011. The EBIT margin dropped to 4.5 percent from 5 percent.
Free cash flow use in the quarter dropped to $642 million from $1.07 billion a year earlier.
Bombardier shares shed 11 Canadian cents to C$3.79 on the Toronto Stock Exchange at mid-session.
Additional reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Supriya Kurane and Janet Guttsman