Bombardier Stocks Strength Is Backed by Bullish Business Developments. By Alessandro Bruno
Bombardier, Inc. (TSE:BBD.B) has managed to beat its 200-day moving average toward the end of last September. This bullish revival has not only lasted; it has resulted in Bombardier stock beating it.
Chart analysts consider such a trend to be a bullish predictor. The potential, based on this analysis, is for BBD.B stock to hit CA$2.00 in the short term. The charts point to this while favorable business developments sustain the upside in 2017.
The big question is whether the facts support the chart analysts bullish sentiment. The short answer is yes; the long answer is that Bombardier could see another surge in 2017 like the one that occurred from February to April of this year. In that two-month period, Bombardier stock more than doubled, going from CA$0.77 per share to CA$2.00 per share.
Bombardier stock has such promise because the company has gotten many favorable signals from the real world, not just from the market. On Halloween, BBD.B stock was down over 1.5%. Yet, also on October 31, Bombardier announced that it obtained two important contracts. One contract concerns its railway division, and the other its business jet division, which is the same division that had caused concerns because of an overall fall in the executive plane market.
Bombardier Scores Crucial $3.0 Billion+ Railway Contract
Bombardier and its French partner Alstom SA (EPA:ALO) are on track to win a tender to build up to 371 new-generation trains. As the number of trains suggests, this is a big deal. Its value ranges anywhere from 3.0 billion to 3.5 billion ($3.2 billion to $4.0 billion). The focus on Bombardiers aerospace products, especially the CSeries airliner, tends to shadow the continued value that its other divisions add.
Indeed, Bombardier and its partner had to beat a Spanish company, Construcciones y Auxiliar de Ferrocarril (BME:CAF) (CAF), to get the bid. Bombardier stock should have reacted more favorably, given the negative pressure that the suspense about the contract award put on BBD.B stock.
Indeed, according to the French paper Le Figaro, the announcement may just have saved over 3,000 jobs (in France). The president of Bombardier Transportation France, Laurent Bouyer, said that missing this contract would have been a catastrophe for the French rail industry. (Source: Un contrat géant à 3 milliards pour Alstom et Bombardier, Le Figaro, October 31, 2016.)
On the executive jet front, Bombardier just sold four Challenger 650 business jets to the Chinese company Minsheng Financial Leasing Co., Ltd., and Zetta Jet of Singapore will operate those jets. The value of this contract is approximately $129.4 million (list price). The order will help sustain Bombardiers executive jet division, but it also highlights a potentially much larger relationship between China and Bombardier. Indeed, Bombardiers CSeries should receive much attention at the ongoing Airshow China 2016 in Zhuhai.
Bombardier Is Now Ready to Attract Lucrative Chinese Airline Business
Bombardier has the right product for the growing Chinese airline industry. Because of new Chinese regulations, it will be more difficult for airlines to operate larger planes (like the Boeing 767, 787, or even longer versions of the 737 and the Airbus A320). The CSeries is a small airliner with a long range and impressive efficiency.
Bombardier is confident that it can get the attention of such carriers as Air China Ltd. (HKG:0753), China Eastern Airlines, China Southern Airlines Co Ltd, and Hainan Airlines Co., Ltd. (SHA:600221, 900945).
If the mainstream carriers arent enough, Bombardier has also approached Chinese start-up carriers. They are bound to get a boost from the countrys new rules, which favor a jump in the regional airline business (and demand). These are the main buyers of the narrow-body planes and regional jets that Bombardier makes, not just the CSeries. (Source: AIRSHOW CHINA: Bombardier aims high for CSeries in China, FlightGlobal, October 31, 2016.)
Finally, and rather appropriately, yesterday being Halloween, Republic Airways Holdings Inc. (OTCMKTS:RJETQ), one of the United States largest regional airlines, may have raised a big contract back from the dead. In February 2010, Republic ordered 40 Bombardier CS300 jets; the first contract that Bombardier won in North America for the budding new regional jet series.
That contract, valued at US$3.1 billion, was all but canceled because of the airline going into bankruptcy protection, as announced last February. Bombardier scrapped the order from its books and the contract was all but dead until it resurfaced on October 26. Little is known about the details of any changes (discounts?) but, if a New York court approves, the deal will be formally back on the books in November. (Source: Republic Airways Defers C Series Orders, Aviation Week, October 27, 2016.)
All of these material developments failed to boost Bombardier stock on Monday. BBD.B stock stayed steady, around the CA$1.80 mark. But, that happened on a day when the markets were shocked by further allegations concerning the Hillary Clinton campaign. The FBI has launched an actual criminal investigation related to Clintons use of a private e-mail server. Clintons campaign may be suffering some heavy turbulence, but Bombardier stock still looks ready to pick up bullish tailwinds, and not just for the planes. |
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