Bombardier eyes a new jet and more capacity as backlog builds

New aircraft on the menu, with supply chain the swing factor

Bombardier is weighing a new model alongside higher output as demand and its order book nudge investment plans. As CEO Eric Martel put it, "Probably half of our capital allocation would probably go to improving our products, staying competitive, which could include a new airplane." He added, "We're going to make that decision based on what our competitors are doing, what our customers are demanding and also, what new technology could be offered out there."

The company is also looking at infrastructure spending to lift production, but Martel said the real constraint is whether suppliers can keep up. Some have lagged in recent years, which pushed out deliveries for aircraft makers.

Quarter in brief and how the market reacted

Based in Dorval, Quebec, the company delivered 33 aircraft in the third quarter, missing a Bloomberg survey by two units. The backlog reached $22.2 billion and its book-to-bill ratio was 1.7 times, outpacing Gulfstream's 1.4 times over the same stretch. Revenue landed at $2.4 billion, a touch under estimates, while adjusted diluted EPS came in at $1.72, topping expectations and jumping 42% from a year earlier.

The stock slipped as much as 9.4% on Thursday and was down 8.8% at C$311.98 at 2:15 p.m. Bombardier now expects free cash flow of $1.3 billion this fiscal year, a $300 million upgrade to guidance. Management is "pretty bullish right now," and sees "clearly a serious potential" to raise output. The company now plans to hand over in excess of 157 jets this year. Gulfstream expects to deliver 160 aircraft, and its president, Mark Burns, has said the company could eventually exceed 200 over time.

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Capex roadmap, M&A and new facilities

Expect more detail on capital spending at Bombardier's Feb. 18 investor day. National Bank of Canada's Cameron Doerksen summed up the setup: "We continue to be bullish on the fundamentals," adding that "strong expected free cash flow in the coming years should lead to more capital returns to shareholders."

In September, Bombardier reached a deal to buy its wing supplier, MHI Canada Aerospace Inc. of Mississauga, Ontario, which would place all wing manufacturing for its aircraft portfolio under Bombardier's direct control. The company also said last month it would allocate $270 million to a learning center and to enhance new capabilities within its US operations.

To expand output, Bombardier is building a C$100 million facility in the Montreal region, equal to $71.5 million, with operations slated to begin by year-end 2027 to increase production.

Why this matters for your portfolio

Rising free cash flow gives Bombardier more options to reinvest and return capital. If vendors keep pace, Bombardier's higher delivery ambitions and any new aircraft program could extend the backlog tailwind. If not, timelines slip and so do the numbers investors care about.

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