BOMBARDIER INC - Toronto symbols BBD.A $3.88 and BBD.B $3.83

BOMBARDIER INC. (Toronto symbols BBD.A $3.88 and BBD.B $3.83; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $6.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.6%; TSINetwork Rating: Average; www.bombardier.com) is the world’s third-largest commercial aircraft maker, behind Boeing and Airbus. It is also the world’s leading passenger railcar manufacturer.

In the three months ended March 31, 2014, Bombardier’s earnings fell 3.2%, to $151 million from $156 million a year earlier (all amounts except share prices and market cap in U.S. dollars). Earnings per share were unchanged at $0.08. Revenue rose 0.3%, to $4.35 billion from $4.34 billion.

Revenue at the railcar division (52% of the total) rose 8.8%, as the company continues to win orders from public transit systems. This business ended the quarter with a record backlog of $38.4 billion, up 18.5% since the start of 2014.

However, revenue at the aircraft division (48%) fell 7.5%, partly due to last December’s sale of its Flexjet subsidiary, which leases business jets.

Bombardier delivered 56 planes in the quarter, up from 53 a year ago. It also won orders for 91 aircraft (net of cancellations), up from just 28. As a result, this division’s backlog rose to a record $38.5 billion, up 3.2% in the past three months.

The company invested $509 million in new plants and equipment during the quarter, as it prepares to ramp up production of the CSeries and other planes. Full-year spending on these upgrades should still range from $1.6 billion to $1.9 billion.

The company’s long-term debt of $7.1 billion is a high 1.1 times its market cap. However, it can borrow up to $1.4 billion under its existing credit lines, which will let it keep investing in the CSeries and other products. Bombardier also holds cash of $2.5 billion, or $1.43 a share.

Fears of more CSeries delays are why Bombardier trades at just 9.6 times the $0.37 U.S. a share it will likely earn in 2014. The $0.10-a-share (Canadian) dividend ($0.10156 for the class B shares) seems safe and yields 2.6% (2.65% for the B shares).

Bombardier B stock is still a buy.

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