Bombardier shares fall to lowest level since 2009 on analyst downgrades

MONTREAL – Bombardier shares slipped to a near six-year low Friday a day after the development of a business jet was put on hold and concerns it would be short of cash caused them to fall more than 25 per cent.

Several analysts downgraded the company as the shares sank as low as $2.70 on the Toronto Stock Exchange. The stock (TSX:BBD.B) closed down 18 cents or 5.9 per cent to $2.89 on 40.6 million shares traded.

The Montreal-based aircraft and train manufacturer triggered what one analyst dubbed “investor panic” when its weaker cash flow guidance raised concerns.

Bombardier said Thursday cash flow from its aerospace division will drop to US$800 million from prior estimates of between US$1.2 billion and US$$1.6 billion.

The company also said it would take a US$1.4-billion charge related to a write down of the value of its Learjet 85 program and lay off 1,000 employees in the U.S. and Mexico as it paused development of the business jet program.

Analyst Kevin Chiang of CIBC World Markets said Bombardier’s management was “running out of excuses” over its inability to consistently deliver on its guidance with the CSeries and Learjet 85 experiencing several delays.

The analyst downgraded Bombardier’s shares to sector perform and cut his 12 to 18-month share price target to $3.07 from $3.50.

He says the announcement “calls into question the company’s ability to execute on its longer term strategy such as reaching its CSeries timelines and Bombardier Transportation’s margin target (eight per cent by 2018).”

Analyst Walter Spracklin of RBC Capital Markets also said he will “remain on the sidelines” as he too lowered his target price 12.5 per cent to $3.50.

He said investors should be cautious about buying Bombardier until it provides more information on its debt management strategy and 2015 financial guidance on Feb. 12.

Analyst David Tyerman of Canaccord Genuity was one of the rare analysts with a buy rating, saying job cuts and the lower Canadian dollar will generate a total of $600 million of increased profitability and cash flow.

Moody’s Investors Service placed Bombardier’s probability of default and senior unsecured ratings under review for possible downgrade and lowered its speculative grade liquidity rating one notch to SGL-3.

“Moody’s believes Bombardier will need to raise additional debt to fund the cash shortfall,” it said in a news release.

That followed S&P’s decision to lower the plane maker’s credit rating one notch to B+ with the outlook remaining negative. Fitch affirmed its BB- rating, but lowered its rating outlook to negative from stable.

Follow @Ross Marowits on Twitter