BOMBARDIER INC. - Toronto symbols BBD.A $4.62 and BBD.B $4.57

BOMBARDIER INC. (Toronto symbols BBD.A $4.62 and BBD.B $4.57; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $8.2 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www.bombardier.com) recently began test flights of its CSeries jet, which seats 100 to 150 passengers. The new CSeries is quieter and 20% more fuel efficient than comparable aircraft.

The company now expects the CSeries’ development costs to total $3.9 billion, up 14.7% from its original 2008 estimate of $3.4 billion (all amounts except share prices and market cap in U.S. dollars). That’s because new accounting rules, which took effect in 2011, have forced Bombardier to include interest costs in the overall estimate.

Bombardier now has firm orders for 177 CSeries jets, plus options for 226 more. If the buyers exercise all these options, the resulting 403 orders would be worth $29 billion. The company aims to begin delivering the planes by the end of 2014.

Meanwhile, Bombardier earned $165 million before one-time items in the three months ended September 30, 2013. That’s down 4.6% from $173 million a year earlier. Earnings per share were unchanged at $0.09.

Revenue fell 3.6%, to $4.1 billion from $4.2 billion. Revenue at the transportation division (51% of the total), which makes passenger railcars, rose 5.9% thanks to new contracts in Europe and South America. However, revenue from the aerospace business (49%) fell 11.8% because it delivered 45 aircraft in the latest quarter, compared to 57 a year earlier.

The company’s order backlog now stands at $65.5 billion, or about 3.9 years of sales. Aerospace accounts for $32.9 billion of the backlog, and transportation for $32.6 billion.

Concerns that Bombardier will miss its target date to begin delivering the CSeries have weighed on the stock. But its existing businesses are sound: it should earn $0.38 U.S. a share this year, and it trades at a moderate 11.7 times that estimate.

The $0.10 (Canadian) dividend yields 2.2% for the class A voting shares; the $0.102 (Canadian) dividend paid on the class B subordinate voting shares also yields 2.2%.

The cheaper class B shares are the better choice because of their slightly better liquidity and higher dividend.

Bombardier B stock is a buy.

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