Expanding Global Aftermarket Services Will Secure Long Term Demand

Key Takeaways

• Strength in aftermarket services, premium business jets, and defense orders supports stable earnings, high margins, and long-term revenue growth.
  
• Strategic innovation, environmental upgrades, and disciplined debt reduction enhance pricing power, margin expansion, and financial resilience.
  
• Heavy dependence on business jets, supply and regulatory risks, delayed cash inflows, and constrained service capacity threaten revenue stability and margin growth.

Catalysts

Engages in the design, manufacture, and sale of business aircraft and aircraft structural components worldwide.

• Robust growth in Bombardier's services and aftermarket business-including expanded service facilities and high utilization rates across a growing fleet-points to a durable, high-margin recurring revenue stream that should support long-term improvements in earnings stability and free cash flow.
  
• The company is benefiting from the expansion of the global high-net-worth population and increased demand for large, long-range business jets (exemplified by high book-to-bill ratios, large new fleet orders, and strength in key markets like Saudi Arabia and the US), setting up sustained revenue and pricing power growth in premium segments.
  
• Strong order momentum in Bombardier Defense, including special mission and surveillance aircraft, leverages a global geopolitical environment with rising defense budgets, contributing to backlog visibility and supporting forward earnings growth.
  
• Ongoing innovation and introduction of next-generation models (e.g., the Global 8000 with higher pricing and margins, plus retrofit upgrades for the 7500 fleet) position Bombardier to capture industry demand for technologically advanced and environmentally progressive aircraft, enhancing margins and supporting premium pricing.
  
• Continued deleveraging through disciplined capital allocation, use of free cash flow for debt retirement, and recent credit rating upgrades are improving balance sheet health and reducing interest expense, which should translate into higher net income and lower financial risk over time.

Bombardier Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bombardier's revenue will grow by 5.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.1% today to 9.6% in 3 years time.
• Analysts expect earnings to reach $980.5 million (and earnings per share of $9.88) by about September 2028, up from $449.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.9x on those 2028 earnings, down from 25.1x today. This future PE is lower than the current PE for the CA Aerospace & Defense industry at 28.5x.
• Analysts expect the number of shares outstanding to grow by 0.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.69%, as per the Simply Wall St company report.

Bombardier Future Earnings Per Share Growth

Risks

• Heavy reliance on the cyclical business jet segment, with Bombardier having divested other divisions, means any downturn in business jet demand or structural shift away from premium travel (such as increased virtual meetings or cost-cutting by corporations) could negatively impact revenue, earnings stability, and margin expansion.
  
• Ongoing supply chain challenges and inventory build-up (with nearly $850 million invested in inventory in H1 2025) suggest persistent logistical headwinds; if these issues do not abate, they risk margin compression through elevated costs, slower production, and potential delivery delays, directly impacting cash flow and profitability.
  
• Although management highlights strong ESG initiatives, the sector's vulnerability to accelerating climate regulation and scrutiny on private aviation emissions could result in higher compliance costs or reduced demand for business jets as clients react to stricter emissions standards, threatening long-term revenue and profit margins.
  
• While Bombardier's large fleet order boosts backlog, deliveries for some sizeable deals do not begin until 2027, resulting in only modest upfront deposits and pushing significant cash inflow further into the future; this introduces risk to near-to-medium-term free cash flow and net income if order momentum slows or cancellations occur.
  
• The continued expansion of aftermarket services faces capacity constraints, as current facilities are described as "full" and the company is "scratching our heads" on volume management; potential underinvestment in service footprint or inability to expand fast enough in key markets like the U.S. could cap high-margin recurring revenue and erode Bombardier's competitive positioning, impacting overall earnings growth.

Valuation

• The analysts have a consensus price target of CA$171.79 for Bombardier based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$200.75, and the most bearish reporting a price target of just CA$120.05.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $10.2 billion, earnings will come to $980.5 million, and it would be trading on a PE ratio of 15.9x, assuming you use a discount rate of 7.7%.
• Given the current share price of CA$156.9, the analyst price target of CA$171.79 is 8.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.