bombardier

SNC-LAVALIN GROUP INC., $55.89, Toronto symbol SNC, rose 7% this week after announcing a major acquisition. The company has agreed to buy U.K.-based Kentz Corp. Ltd. (London exchange symbol KENZ), which provides engineering and construction services to the oil and gas industry. Kentz operates in 36 countries, which should increase SNC’s exposure to fast-growing regions like the Middle East, Asia and Australia....

DOREL INDUSTRIES, $38.69, symbol DII.B on Toronto, has agreed to buy Hong Kong-based Lerado Group, a maker of baby strollers and infant car seats, for $120 million. Lerado also makes baby beds, high chairs and baby bouncers. The acquisition includes four facilities—a research centre in Taiwan and three manufacturing plants in China. These will be Dorel’s first company-owned factories in Asia, which reduces its reliance on third-party suppliers in the region; Dorel will now be able to make its own products to sell in China and export around the world. Right now, the company’s juvenile division gets only a small part of its sales from China. But China’s new infant-seat laws and growing middle class make it a great place for Dorel to expand....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 263.8 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) has a long history of developing flight simulators for Bombardier’s aircraft. This expertise will give CAE an advantage when airlines begin training their pilots to operate the new CSeries jet.

Meanwhile, the company sold a record 48 simulators in its 2014 fiscal year, which ended March 31, 2014. It ended the year with a $4.2-billion order backlog, which is equal to roughly two years’ worth of revenue.

CAE is our #1 buy for 2014.

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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.

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HILLSHIRE BRANDS CO., $61.82, New York symbol HSH, rose 5% this week in response to a new takeover offer. The company makes a variety of packaged meat products. Its main brands include Ball Park hot dogs, Jimmy Dean sausages and Hillshire Farm deli meats. Other foods include Sara Lee frozen desserts and Chef Pierre pies. This week, Tyson Foods (New York symbol TSN) offered to buy the company for $63.00 a share. That topped an earlier $55.00-a-share bid by Pilgrim’s Pride Corp. (Nasdaq symbol PPC). Pilgrim’s Pride has now withdrawn its offer....

Bombardier recently had to suspend test flights of its CSeries passenger plane because of a problem with its Pratt & Whitney engines, which are 20% more fuel-efficient than current models. This was the first major issue with this new engine in over three years of testing.

The delay will probably add to the CSeries’ development costs, but Bombardier still expects to begin deliveries in the second half of 2015.

Uncertainty over the CSeries adds to Bombardier’s risk, and weighs on its stock price....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 263.8 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) has a long history of developing flight simulators for Bombardier’s aircraft....

CAE INC., $14.55, Toronto symbol CAE, is the world’s leading maker of flight simulators for commercial airlines. It also makes simulators for militaries and operates pilot-training schools. In its fiscal 2014 fourth quarter, which ended March 31, 2014, CAE’s earnings rose 39.2%, to $60.0 million from $43.1 million a year earlier. Per-share earnings gained 35.3%, to $0.23 from $0.17, on more shares outstanding. That beat the consensus estimate of $0.20. Revenue rose 3.1%, to $583.4 million from $565.6 million. CAE received orders for eight flight simulators during the quarter, which brought its full-year total to a new record of 48. Since the quarter ended, it has sold an additional four simulators. The company’s military-related businesses also continue to win new contracts....

TORSTAR CORP., $8.15, Toronto symbol TS.B, jumped 22% on Friday after it agreed to sell its Harlequin book-publishing subsidiary to News Corp. (Nasdaq symbol NWSA), the parent company of publishing firm HarperCollins. In 2013, Harlequin supplied 29% of Torstar’s revenue and 32% of its earnings. The company will receive $455 million, which is equal to 70% of its $651.4-million market cap (or the value of all of its outstanding shares). The deal should close by September 30, 2014....

PRECISION DRILLING CORP., $12.89, Toronto symbol PD, announced two new contracts this week. The first is a multi-year deal with a client in the Middle East to build a Super Triple drilling rig, which can reach deeper pockets of oil and natural gas than Precision’s regular rigs. The company will deliver this rig in the fourth quarter of 2014. The second is a multi-year contract to supply six rigs to a project in Mexico....