May 20, 2019 / 11:32 AM / 6 months ago

BUZZ-Bombardier: Long-term targets in question; MS cuts PT, estimates

** Brokerage Morgan Stanley cuts Bombardier’s PT, 2019/2020 EPS estimates

** Now expects co to post a loss of 2 Canadian cents per share in 2019, compared with an earlier estimate for profit of 8 Canadian cents; MS estimates are 31 pct below Street consensus

** Says further margin or working capital headwinds at its transportation segment raises question on Bombardier’s long-term targets

** Also cuts 2020 EPS estimate to 20 Canadian cents from 22 Canadian cents

** Says Bombardier has “one of the riskier profiles”, with margins at industry lows (6-7% vs. peers at 8-12%) and leverage near industry highs at ~4.0x 2019 net debt to EBITDA

** Says FCF over next 12-24 months critical due to challenges in transportation business that builds railcars

** Brokerage reduces PT to C$2.75 from C$3.25; maintains “Equal Weight” rating

** 7th PT cuts since Bombardier CFO told analysts at an AGM on May 2 that he would not commit to previously announced objectives for 2020, such as growing revenue to $20 billion

** 15 of 19 brokerages rate the stock “buy” or higher, 4 “hold”; their median PT is $3.88

** Stock has fallen ~28% since it cut its full-year profit and revenue forecasts on April 25 (Reporting by Arathy S Nair)

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