Influential analyst lowers Bombardier rating

Bombardier is expected to post soft third-quarter results next week, prompting at least one analyst to downgrade his rating for the plane and train manufacturer and trim his share target price.

Analysts on average expect that the Montreal-based company will earn 11 cents per share in adjusted profits on $4.68 billion U.S. of revenues when results are released Nov. 7. That would be in line with results from the third quarter of 2011.

But Cameron Doerksen of National Bank Financial is more pessimistic, forecasting that results will be 3 cents per share weaker. He has trimmed his price target by 25 cents to $4.25 because of lower sales of Challenger business aircraft and regional jets, increasing risk of a delay in the first flight of the CSeries and a possible one-year delay in the railway division reaching its targeted profit margin.

“We continue to see longer-term upside on Bombardier shares, but we are lowering our rating ... due to our shorter-term concerns,” he wrote in a report Wednesday.

Recent data on used business jet inventories and aircraft usage suggest the market for corporate jets is fairly stagnant. Large Global aircraft orders and deliveries are strong, but he said the mid-sized market has “stalled” and the light business jet markets remains “quite weak.”

Consequently, he trimmed his business jet delivery forecast for 2013 and assumes “flattish” deliveries from 2012.

Doerksen also raised concerns that ongoing aircraft development programs could drain free cash later in the decade and remain “depressed for the foreseeable future.”

At Bombardier Transportation, he expects the target of achieving an 8 per cent pre-tax earnings margin this year will be delayed until 2013.