February 13, 2014 / 12:45 PM / 6 years ago

UPDATE 1-Bombardier profit misses estimates; lowers 2014 margin target

Feb 13 (Reuters) - Canadian plane and train maker Bombardier Inc reported a lower-than-expected quarterly profit due to a fall in gross margin and forecast a slowdown in revenue growth at its rail unit this year.

The Montreal-based manufacturer of the brand-new CSeries jetliner also lowered its full-year target for core earnings margin, a closely watched performance measure, at both its aerospace and rail businesses.

Bombardier’s fourth-quarter revenue rose 15 percent to $5.32 billion, beating analysts’ average estimate of $5.05 billion, according to Thomson Reuters I/B/E/S.

However a 16 percent rise in cost of sales led to gross margins falling to 11.8 percent from 12.4 percent a year earlier.

Bombardier reported net income of $97 million, or 5 cents per share, for the quarter ended Dec. 31.

It posted a loss of $4 million, or 1 cent per share, a year earlier mainly due to a charge of $119 related to a plant closure and jobs cuts in its rail business.

Excluding items, the company earned 7 cents per share in the latest quarter, below the average analysts estimate of 11 cents per share.

Bombardier said it expects margins on earnings before financing expenses, financing income and income taxes (EBIT) for its aerospace division to be 5 percent in 2014, down from its earlier target of about 6 percent.

The company said it expects EBIT margin of about 6 percent at its rail unit in 2014. However, Bombardier said its earlier target of 8 percent remains the objective.

Bombardier said it expects a mid-single digit percentage growth in the unit’s revenue, excluding currency impacts, in 2014. Revenue at the rail unit grew 12.6 percent in 2013.

The company said on Thursday the initial ground and flight test performance results of the CSeries jetliner program were in line with the company’s expectations.

Last month, Bombardier warned that the CSeries would not go into commercial service until the second half of 2015, the latest in a string of delays that has pushed back the CS100’s entry into service by some 18 to 24 months.

Bombardier shares have fallen more than 8 percent since the CSeries announcement. They closed at C$4.04 on Wednesday on the Toronto Stock Exchange.

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