Bombardier (TSX:BBD.B) stock's performance over the past year has been nothing short of impressive. The company's shares surged more than 100% year over year, showcasing the resilience of this Canadian business jet manufacturer.

Bombardier stock emerged as a standout performer on the Toronto Stock Exchange, even landing on the TSX30 list for a second consecutive year. The TSX30 recognizes the fastest-growing stocks on the exchange over a three-year period, solidifying Bombardier stock's place as a market leader in the aerospace sector. However, with today's trading showing a 4.61% dip, it's worth asking whether this is just a bump in the road or a sign of volatility ahead.

Into earnings

The company's third-quarter 2024 results, released in November, exceeded many expectations. Bombardier stock posted revenues of $2.1 billion, marking a robust 12% year-over-year increase. Much of this growth came from its services division, which brought in a record $528 million, accounting for nearly a quarter of total revenues. Services, including maintenance, upgrades, and parts for its extensive fleet of jets, have become a cornerstone of Bombardier's strategy to drive steady, high-margin revenue. The strong performance in this segment reflects both the growing demand for business jet travel and Bombardier's strategic focus on expanding its aftermarket business.

Aircraft deliveries also played a key role in the company's third-quarter success. Bombardier stock delivered 30 jets during the period despite facing operational disruptions, including an 18-day strike at one of its Canadian facilities. Labour challenges and supply chain disruptions posed hurdles. Yet Bombardier stock managed to stay on track with its full-year delivery target of 150 to 155 aircraft. This resilience underscores Bombardier's ability to navigate industry-wide challenges while maintaining steady production and client satisfaction.

Financially, Bombardier's bottom line continues to improve. The company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $307 million, reflecting an adjusted margin of 14.8%, up from the prior year. This margin expansion speaks to better cost controls and improved operational efficiency. Plus, there is a favourable product mix of high-performance jets like the Global 7500. Adjusted earnings per share (EPS) came in at $0.74, surpassing analyst expectations. This combination of revenue growth and profitability signals Bombardier's ability to generate strong cash flow, even in a challenging macroeconomic environment.

Looking ahead

Debt reduction remains a top priority for Bombardier, and it's making measurable progress. As of the most recent quarter, the company's total debt stood at $5.99 billion, down significantly from its peak levels. In early December, Bombardier stock announced a $300 million partial redemption of its 7.875% Senior Notes due in 2027, demonstrating its commitment to deleveraging. This focus on reducing debt is crucial for improving the company's balance sheet, lowering interest expenses, and enhancing investor confidence in its long-term financial health.

Looking ahead, Bombardier's future appears promising. The business jet market continues to experience robust demand, driven by corporate clients, high-net-worth individuals, and a resurgence in private air travel. Bombardier stock's premium products, like the Global and Challenger series jets, are well-positioned to meet this demand. Its $14.7 billion order backlog as of September reflects sustained interest from clients. Plus, it provides a strong revenue pipeline heading into 2025. Analysts anticipate continued revenue growth and margin expansion — particularly as the company's services segment becomes a larger share of its overall business.

Investor sentiment around Bombardier stock is cautiously optimistic. The stock enjoyed a stellar rally. Yet it holds a trailing price-to-earnings (P/E) ratio of 16.5 and a forward P/E of 11.03. This might cause some investors to question whether the stock is still undervalued or approaching fair value. Bombardier stock's high beta of 2.97 indicates that the stock remains volatile, making it sensitive to broader market movements and investor sentiment.

Bottom line

Bombardier stock has proven itself to be a turnaround story in recent years. With strong financial results, an improving balance sheet, and a clear strategy for growth. Sure, challenges remain. Yet the company's focus on expanding its aftermarket services, maintaining strong deliveries, and deleveraging its balance sheet should keep it on an upward trajectory. For investors willing to ride out the volatility, Bombardier stock could remain an attractive play in the Canadian aerospace sector.