Shares of airplane manufacturer Bombardier Inc. (BBD/B:TSX) have experienced a 15 percent decline since mid-April, which has increased the stock's appeal, although caution is advised due to ongoing economic headwinds, according to a TD Cowen analyst in an April 28 note.
Analyst Maintains Price Target Despite Slump
The Montreal-based company is set to report earnings on April 30. TD analyst Tim James has maintained his price target of $275 per share and a hold rating. Bombardier was trading on the S&P/TSX composite index at $237.50 as of 3 p.m. in Toronto. The stock has a 12-month price target of $275.92 based on the consensus of 13 analysts, according to Bloomberg.
James noted that the recent share pullback may have lowered the threshold for a positive reaction to the upcoming earnings results. He emphasized that the environment, rather than fundamentals, supports caution for the time being.
Risks from CUSMA Review and Economic Tensions
The approaching review of the Canada-United States-Mexico Agreement (CUSMA) and potential negative outcomes or further deterioration in the Canada-U.S. economic relationship pose risks to Bombardier's share price, James warned.
First Quarter Earnings Expectations
For the first quarter, TD Cowen expects Bombardier to report a 13 percent year-over-year increase in revenues to $1.72 billion, with flat deliveries compared to the previous year. The firm anticipates a 14 percent increase in services revenues and a significant rise in the company's defence segment.
James expects executives' earnings commentary to focus on demand or orders, supply chains, defence, and return on capital.
Defence Strategy and New Orders
Bombardier is well positioned to benefit from the federal government's new 'buy Canadian' defence strategy, as stated by CEO Éric Martel in late February. The company is already partnering with SAAB to produce GlobalEye aircraft, using Bombardier's Global 6500 jets as the platform for surveillance and radar systems. This project is known as the airborne early warning and control system in Canada.
In February, Bombardier announced that Vista Global Holding Ltd. had ordered 40 Challenger 3500 business jets, with an option for an additional 120 aircraft. TD Cowen noted that this deal should support free cash flow in the first quarter, though confidence in the first quarter cash flow outlook is typically low due to other working capital challenges.
2026 Guidance and Fundamentals
Guidance for 2026 remains intact, and James is bullish on the fundamentals, which call for revenue growth of over five percent and adjusted EBITDA growth of more than four percent, or 12 percent excluding input tax credits.
James looks forward to more information on defence opportunities to determine if the pipeline supports existing growth expectations or could provide incremental upside. He noted that expansion in defence could diversify revenue, reduce risk profile, and attract investor interest.
