February 15, 2015

Bombardier Inc. is updated and rated Highly Speculative (lower) Buy at Canadian $2.58. I just spent many hours reading its brand new 2014 annual report. This is a sad story. It’s a huge company with 74,000 employees. It’s profitable on an adjusted basis. But write-offs and special charges and balance sheet re-valuations have pushed the common equity into the negative range. The founding family has clung to control with multiple voting shares and even placed a third generation family member in the CEO chair and left him there (until this month) as the common equity in the company melted away. It unfortunately appears that the Aviation side of the business has particularly horrible economics. They sell planes at very skimpy margins and often have to guarantee the financing for the purchase and the customers often have below investment grade credit ratings. The subway car and train side of the business is moderately better.

This company now appears to be a pure speculation. It cannot be considered to be investment grade. It might bounce on news but that is quite speculative. Its next hurdle is to try to raise the equity and debt that it now needs.

On Friday, the S&P 500 was up 0.4% to a record high close. Toronto was up 0.2%.

Ebay was up 3.2%, Couche-Tard was down 2.5%. American Express was down 3.0%.