Headline: This CANNOT be good….
Situation: Bombardier just announced a new organizational structure of four segments by splitting Aviation into three units – Business Aircraft, Commercial Aircraft, and Aerostructures and Engineering Services.
- Aerospace President & COO Guy Hachey is “retiring” at age 59 – with the biggest product launch of his career (CSeries) underway.
- The “A&ES” business does not yet have a business leader.
- A detailed implementation plan “is to be developed” over the next few months to be implemented by January 1, 2015.
Our view: Again, this cannot possibly be good.
- The stock likely trades down tomorrow.
- Faith in management execution was already low.
Recommendation: Value investors should buy the dip. Further patience will be required.
- Bombardier is not the standard bearer for delivering results. We get it.
- Bombardier is a publicly traded family owned business and its structure prevents adult supervision from activist investors.
- But they make very good aircraft. The CSeries will be ultimately successful.
- We can get to a 3-5 year target price range of C$11-21 per share from today’s close of C$3.74.
Laterals: Anybody with an aerospace investment or business interest.
► ERJ – Embraer ► TXT – Textron ► UTX – United Technologies