Bombardier profit dips as plane deliveries, orders fall
TORONTO (Reuters) - Canadian plane and train maker Bombardier Inc (BBDb.TO) reported a 15 percent fall in net profit on Thursday, pressured by fewer aircraft orders and deliveries in the third quarter and contract issues in its train unit.
Montreal-based Bombardier also did not release any flight test data for its brand-new CSeries aircraft or offer an update on whether the plane will meet its ambitious schedule of going into commercial service by next September.
After the test plane's inaugural flight about a month and a half ago, it has only flown three more times, raising questions over whether the testing phase is on track.
Results fell short of forecasts and sent shares sliding more than 8 percent on the Toronto Stock Exchange.
Cameron Doerksen, an analyst with National Bank Financial, lowered his rating to "sector perform" from "outperform" on Thursday with the view that the stock has limited upside over the next one or two quarters.
"While the weaker aircraft deliveries were mostly anticipated, we are clearly disappointed by the margin performance in transportation," Doerksen said in a client note.
"We believe that Bombardier will receive new orders for the CSeries as the flight test program progresses ... however, if no new orders are announced in the coming months, we suspect that the market will become more skeptical of the program."
Bombardier hopes the CSeries aircraft family can catapult it into the low end of a market now dominated by Boeing Co (BA.N) and Airbus (EAD.PA). The first test plane was unveiled in March and took flight for the first time in September after months of delays.
But firm orders for the CSeries are moderate so far at 177 as potential buyers wait for flight test results to validate the company's claims about the new jetliner's fuel efficiency and cost savings potential.
There are currently 403 total orders and commitments with 15 customers and operators. Chief Executive Officer Pierre Beaudoin was confident Bombardier would meet its 300 firm order target by the time the first jet is put into commercial use.
Executives also reassured analysts and media on Thursday the program was progressing according to schedule.
"(The test plane) didn't stay on the ground longer than anticipated," Beaudoin said in a conference call, adding that ground tests and software updates were scheduled during the plane's downtime.
"Every manufacturer schedules it in a different way. We had decided to do a first flight and to do an update period and that's what we have done ... that will happen all through the flight program."
The second of five test planes is expected to take flight in the coming weeks, with the remainder following shortly after, the company said.
Still, analysts are skeptical the first customer can begin operating a CSeries plane 12 months after its maiden flight. Bombardier said it was evaluating the entry-into-service (EIS) schedule and will provide an update in the next few months.
"This slow pace of flight testing - although in line with Bombardier's internal schedule apparently - reinforces our view that entry-into-service will be pushed to Q1/15," said Doerksen.
RESULTS BELOW EXPECTATIONS
For the third quarter ended September 30, Bombardier's net profit fell to $147 million, or 8 cents per share, from $172 million, or 9 cents per share a year earlier.
Adjusted earnings per share were unchanged at 9 cents.
Revenue dipped marginally to $4.1 billion from $4.2 billion.
Analysts had expected earnings of 10 cents per share and revenue of $4.56 billion, according to Thomson Reuters I/B/E/S.
The world's fourth-largest planemaker said it delivered 45 aircraft during the quarter, down from 57 a year earlier. Net orders fell to 26 aircraft, from 83.
The backlog in the aerospace division was $32.9 billion as of September 30, unchanged from December 31.
"In aerospace, results were in line with our guidance, but the low order intake and overall market conditions were a disappointment," Beaudoin said.
Aerospace revenue fell 13 percent to $2 billion.
Bombardier, the world's largest trainmaker, said revenue in that division rose nearly 11 percent to $2.1 billion.
The order backlog in the transportation unit was $32.6 billion as of September 30, up marginally from December 31.
The transportation division's margins were affected by execution issues in a few large contracts.
Executives said new guidance would be provided in the fourth quarter.
Shares of Bombardier, which also announced that Google Inc (GOOG.O) Chief Financial Officer Patrick Pichette would join the board, were down 8.5 percent at C$4.83 in mid afternoon trading on Thursday.
Brazil's Embraer SA (EMBR3.SA), the world's third-largest commercial planemaker and Bombardier's closest rival, reported a 10 percent fall in quarterly profit on Thursday.
(Additional reporting by Swetha Gopinath in Bangalore; Editing by Jeffrey Hodgson, Matthew Lewis and Chris Reese)
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