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Bombardier free cash flow forecast short of expectations, shares fall

Published 02/08/2024, 06:39 AM
Updated 02/08/2024, 11:56 AM
© Reuters. A plane flies over a Bombardier plant in Montreal, Quebec, Canada on January 21, 2014.   REUTERS/Christinne Muschi/File Photo

By Abhijith Ganapavaram and Allison Lampert

(Reuters) -Canada's Bombardier (OTC:BDRBF) on Thursday forecast 2024 free cash flow, a metric watched closely by investors, that was below analysts' estimates and its shares tumbled more than 13%.

The Montreal-based planemaker said it expected free cash flow of $100 million to $400 million for the year, falling well short of the $552 million, on average, expected by analysts, according to LSEG data.

The company did forecast stronger 2024 revenue as private jet deliveries rise.

Business jet makers have been boosted in the last two years by a switch to private flying during the pandemic, which allowed companies such as Bombardier to increase prices. But supply chain challenges, labor shortages and softening global economic growth remain headwinds.

The company expects to see margin expansion in 2024 and 2025, and predicted revenue this year of $8.4 billion to $8.6 billion, above analysts' expectations of $8.27 billion, according to LSEG data.

But the free cash guidance for 2024 "could result in skepticism" on a stronger free cash flow target of above $900 million for next year, Desjardins analyst Benoit Poirier wrote in a note to clients.

Bombardier stock dropped 13.2% to C$45 a share in midday Toronto trading.

Bombardier CEO Eric Martel said that while the supply chain has improved, the company had to slow some production to allow suppliers to get back on track.

“Some of the significant suppliers, I would say, are still in a catch-up mode, but we have less issues,” Martel said.

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Bombardier expects to deliver between 150 and 155 jets this year, compared with 138 last year.

The company reported a lower fourth-quarter adjusted net income of $135 million, down from $205 million a year earlier, amid lingering supply snags.

On a per share basis, adjusted profit was $1.37, one cent below Wall Street expectations.

Revenue rose 15.3% to $3.06 billion in the quarter through December, beating estimates of $2.88 billion, helped by higher deliveries and record revenue from aftermarket services.

Chief Financial Officer Bart Demosky told analysts he sees another year of double-digit aftermarket growth in 2024.

Free cash flow from continuing operations rose to $646 million, below expectations of $672 million.

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