bombardier

PLEASE NOTE: One week from today, on January 29, 2016, shortly after the stock market closes at 4:00 p.m. Toronto time, we will reveal our top U.S. stocks for 2016 to subscribers of Wall Street Stock Forecaster.

You can be among the first to hear about our top picks for 2016....

We’re still positive on the long-term outlook for stocks. But in a time of rising market volatility, plunging commodity prices and international tension, it’s more important than ever to diversify, rather than focus on a single pick of the year. Moreover, we find lots of attractive long-term buys among the stocks we cover.

With that in mind, we’ve chosen to highlight three picks from our Stock Pickers Digest recommendations....

WESTJET AIRLINES $18.52 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 123.3 million; Market cap: $2.2 billion; Dividend yield: 3.0%) serves 100 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 108 modern Boeing 737s are 30% more fuel efficient than older jets. In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 23 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers. The Canadian airline market remains highly competitive, especially with Air Canada expanding its Rouge budget airline to serve more leisure destinations in Europe, the Caribbean, Mexico and the U.S....

BOMBARDIER INC. $1.35 (www.bombardier.com) recently sold 30% of its railcar business to Caisse de dépôt et placement du Québec, which manages the province’s public pension plan, for $1.5 billion U.S. It also sold 49.5% of its CSeries passenger jet business for $1 billion U.S. However, its debt of $9.0 billion U.S. is now a high 4.8 times its depressed market cap of $2.7 billion (Canadian). As a result, we’ve cut Bombardier’s TSINetwork Rating, from “Extra Risk” to “Speculative”. Hold. PENGROWTH ENERGY INC. $0.72 (www.pengrowth.com) has sold its Jenner oil property in Alberta for $78 million. This is part of its plan to sell $600 million of its less-important properties, and apply the proceeds to its long-term debt of $1.86 billion (as of November 30, 2015), which is a high 4.8 times its $391.0-million market cap. However, low oil prices will hurt its ability to keep paying down debt, which is why we’ve cut Pengrowth’s TSINetwork Rating, from “Average” to “Speculative”. Hold. RESTAURANT BRANDS INTERNATIONAL INC. $46 (www.rbi.com) has raised its quarterly dividend by 8.3%, to $0.13 U.S. a share from $0.12 U.S. The new annual rate of $0.52 U.S. yields 1.5%. Hold....

In next week’s Successful Investor Hotline, we’ll reveal our top stock picks for 2016. Don’t miss this unique opportunity to profit. TRANSCANADA CORP., $43.47, Toronto symbol TRP, has launched two legal challenges to the U.S. government’s recent decision to block its proposed Keystone XL pipeline, which would have pumped crude oil from Alberta to the U.S. Gulf Coast. The company spent $4.3 billion on Keystone XL and now expects to write off between $2.5 billion and $2.9 billion of this total. To put these figures in context, TransCanada’s market cap (or the value of all outstanding shares) is $30.8 billion....

CANADIAN PACIFIC RAILWAY LTD., $198.88, Toronto symbol CP, has offered to buy U.S.-based railway Norfolk Southern Corp. (New York symbol NSC). The combined firm would be North America’s largest railway, with more than 56,000 kilometres of track. Buying Norfolk would also give CP greater access to ports on the U.S. Gulf Coast and Atlantic Ocean. Norfolk shareholders would receive $46.72 U.S. a share in cash and 0.348 of a CP share (or roughly 50% in cash and 50% in stock). That would give them 41% of the combined company....

Top regional airline Chorus Aviation is a rising growth stock, but its affiliation with Air Canada may prove to bring as much risk as reward.

BOMBARDIER INC., Toronto symbols BBD.A $1.50 and BBD.B $1.42, announced this week that it will form a new joint venture with the government of Quebec.

Under the deal, the government pay $1.0 billion for 49.5% of a partnership that will own the CSeries passenger jet business (all amounts except share prices in U.S. dollars). Bombardier will own the remaining 50.5%.

The company is also giving Quebec warrants to buy up to 200 million class B subordinate voting shares at the U.S. dollar equivalent of $2.21 (Canadian) each. The warrants expire in five years. If Quebec exercises all of them, the extra shares would equal 8.18% of the total class A and B shares currently outstanding.

Bombardier has also promised to keep its headquarters and CSeries plants in Quebec for the next 20 years.

The cash from this sale will help Bombardier finish certifying the CSeries; flight tests are now 97% complete. Quebec’s backing should also help attract more buyers. The company has firm orders for 243 CSeries planes but hasn’t received any new orders in the past year.

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CANADIAN PACIFIC RAILWAY LTD., $202.17, Toronto symbol CP, reported lower freight volumes in the latest quarter, mainly due to falling prices for oil and other commodities, but the railway still reported better-than-expected results. In the three months ended September 30, 2015, CP earned $427 million, up 6.8% from $400 million a year earlier. Per-share profits jumped 16.5%, to $2.69 from $2.31, on fewer shares outstanding. These results exclude unusual items, such as gains on asset sales. On that basis, the latest earnings beat the consensus estimate of $2.67. Revenue gained 2.3%, to $1.71 billion from $1.67 billion, also beating the consensus forecast of $1.69 billion....

LINAMAR CORP., $70.26, Toronto symbol LNR, has offered to buy 100% of Montupet SA, a French maker of aluminum car parts with plants in Europe, North America and Asia. The company will pay $1.16 billion for Montupet’s shares and will assume $97.5 million of its debt. The deal’s total value—$1.25 billion—is equal to 27% of Linamar’s $4.6-billion market cap (the value of all outstanding shares). Linamar will borrow the cash it needs for this purchase, which will increase its long-term debt from $581.3 million (as of June 30, 2015) to around $1.8 billion. That’s a high, but still manageable, 39% of Linamar’s market cap. The new operations will immediately add to the company’s cash flow and earnings, helping it pay down the extra debt....