ANALYSIS - For Bombardier, rail deal won't offset aerospace

By John McCrank

TORONTO (Reuters) - Bombardier Inc's train-building segment has built a lot of momentum on the back of stimulus spending around the world, but the company's share price is unlikely to rebound until aircraft orders perk up.

Bombardier's share price is well off its March lows, but it is still down more than 40 percent from its peak in the summer of 2008 before the global economic downturn nearly froze the market for its regional aircraft and business jets. Analysts don't expect that situation to improve much any time soon.

The company got some welcome news on Wednesday when France's SNCF said it is in exclusive talks with Bombardier, the world's No. 1 trainmaker and No. 3 planemaker, to buy rail cars in a deal valued at as much as 8 billion euros ($11.98 billion). That follows recent wins for the rail division in India, China and Italy.

While the French deal is significant and points to long-term growth, it does little for the company's short-term outlook, says Cameron Doerksen, an analyst at Versant Partners.

"The transportation segment is doing quite well," he said. "They've won some significant orders recently and the outlook for additional contracts is positive, so there are no concerns on that side of the business. For me it's more the aerospace business that is of concern."

That view seemed to be reflected in Bombardier's share price, which slipped 0.8 percent on Thursday to C$4.94 on the Toronto Stock Exchange. The SNCF announcement came after North American markets closed on Wednesday.

Signs of continued pain in aerospace may emerge when the company reports fiscal third-quarter results on Dec. 3.

Some market players expect it to announce further cuts in production, a sign that aerospace is still caught in the doldrums.