cuts price target on Bombardier; sees further CSeries
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[September 02, 2014]
TORONTO (Reuters) - Goldman
Sachs cut its price target on Bombardier Inc and
reiterated a "sell" rating on shares of the train and
plane maker on Tuesday, warning it expected the CSeries
aircraft's entry into service to be delayed again.
Goldman's price cut came just days after a Swedish carrier backed
out as the first customer to start commercial flights with its new
Malmo Aviation, owned by Sweden's Braathens Aviation, was slated to
be the first CSeries customer to take delivery of the new jet in the
second half of 2015, but the airline said on Friday that will no
longer be the case. It cited worries about further delays after a
May engine failure grounded the jets.
"We believe the CSeries will negatively impact Bombardier's
financial results and create negative catalysts for the next
several years," Goldman analyst Noah Poponak said in a note to
Poponak reiterated the "sell" rating and trimmed his price target to
C$3 from C$3.20.
The CSeries aircraft, which will compete with Boeing Co's 737 MAX as
well as the Airbus A320neo, has been grounded for more than three
months. Bombardier, following an initial test flight in September
2013, had earmarked roughly two years for testing after a delay in
the development process.
Poponak said the aircraft has completed just 330 hours of flight
testing since its first flight, out of a planned 2,400 total hours,
meaning Bombardier has achieved less than 15 percent of planned
flight test hours, while using nearly half of the time it had
allotted toward testing.
He contended if flight tests resumed in September, Bombardier would
need to complete an average of about 160 test flight hours per month
to achieve the currently planned second half of 2015 entry into
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"We see that as very unlikely given the pace achieved before
grounding, momentum (not just time) lost during grounding, and
the high risk of new problems occurring other than this engine
incident," said Poponak.
Shares in Bombardier closed more than 3 percent lower at C$3.66 on
Friday on the Toronto Stock Exchange after the Swedish carrier said
it was backing out.
(Reporting by Euan Rocha; Editing by Jeffrey Benkoe)
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