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Bombardier downgraded by Goldman Sachs over CSeries challenges

Analysts expect further delays, will negatively impact financial results.

September 3, 2014   by The Canadian Press

MONTREAL — Further delays expected in the delivery of Bombardier’s new CSeries commercial jetliner and the loss of an initial buyer led analyst Goldman Sachs to downgrade its assessment and urge investors sell the transportation company’s shares.

The CSeries’ flight test program has been grounded for more than three months since an engine failure and Swedish company Braathens Aviation (Malmo) disclosed last week that it will no longer be the aircraft’s launch operator. In 2011, it had placed an order for five CS100 planes and five CS300 models, for a total amount of $655 million, with options for additional planes.

Analyst Noah Poponak says it is “inevitable” that there will be further delays with the aircraft’s launch planned for the second half of next year.

The New York analyst anticipates the 110- to 160-seat plane will “negatively impact” Bombardier’s financial results and create “negative catalysts” for several years.

Poponak says Bombardier will not likely be able to dramatically pick up the pace of flight tests to about 160 hours per month, from 37 hours before the program was grounded, to meet its delivery deadline.

But Canaccord Genuity sees promise in Bombardier, expecting “significant” earnings growth in the coming years from new aircraft launches, margin improvements at aerospace and transportation from restructuring, higher demand for some aircraft and the lower Canadian dollar.

However, analyst David Tyerman cautions that Bombardier’s improvement may unfold slowly and doesn’t believe Malmo’s decision will change the prospects for the CSeries.

© 2014 The Canadian Press


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