Bombardier Inc reported a quarterly profit that fell well short of expectations on Thursday and cut its 2014 earnings forecast as it spends heavily on developing its new CSeries jetliner, and its shares fell sharply in reaction. The Montreal-based plane and train maker is spending billions to develop the CSeries, a high tech narrow-body plane that will compete with smaller passenger jets made by Boeing Co and Airbus Group, but the program has been delayed four times and costs are rising. Bombardier said on Thursday it was increasing the $3.9 billion price tag for the CSeries by $1.05 billion: $750 million for tooling and $300 million in borrowing costs. As well as the CSeries costs, fourth-quarter results at Bombardier’s plane division were weighed down by tough competition in the commercial jet market and sales of low-margin sales business jets, executives said on a conference call. RBC Capital Markets analyst Walter Spracklin said the quarter was weak “on many different levels,” with free cash flow and spending in the aerospace unit of particular concern. Fadi Chamoun, an analyst at BMO Capital Markets, also raised a flag about cash resources, which he said were “not at a comfortable level” at around $3.4 billion. “Although expectations were muted going into the quarter and the stock has sold off in recent weeks, we expect Bombardier to come under pressure today,” he wrote in a note. Bombardier shares dropped more than 10 percent to C$3.61 in morning trade on the Toronto Stock Exchange. The company’s fourth-quarter revenue rose 15 percent to $5.32 billion, ahead of analysts’ average estimate of $5.05 billion, according to Thomson Reuters I/B/E/S. However, a 16 percent increase in the cost of sales cut gross margins to 11.8 percent from 12.4 percent a year earlier. Bombardier reported net income of $97 million, or 5 cents per share, for the quarter ended Dec. 31. In the year-before quarter it posted a loss of $4 million, or 1 cent a share, mainly due to a charge of $119 million related to a plant closure and jobs cuts in its rail business. Excluding items, the company earned 7 cents a share in the latest quarter, below analysts’ average estimate of 11 cents. Bombardier said it expects margins on earnings before financing expenses, financing income and income taxes (EBIT) for its aerospace division to be 5 percent in 2014, down from its previous target of about 6 percent. Capital spending in the aerospace division will be in a range between $1.6 billion and $1.9 billion this year and $1.2 billion and $1.5 billion in 2015, Bombardier said. The company said it expects an EBIT margin of about 6 percent in its rail unit in 2014, but will keep an 8 percent target, though it did not set a timetable for reaching that “objective”. Bombardier said it expects a mid-single digit percentage growth in the rail unit’s revenue, excluding currency impact, in 2014. Revenue at the rail unit rose 12.6 percent in 2013. The company said initial ground- and flight-test performance results for the CSeries were in line with the company’s expectations. Last month, Bombardier warned that the CSeries would not go into commercial service until the second half of 2015, the latest in a string of delays that has pushed back the plane’s entry into service by 18 to 24 months. ($1=$1.10 Canadian) (With additional reporting by Ashutosh Pandey in Bangalore, and Alastair Sharp in Toronto; Editing by Maju Samuel, Savio D’Souza and Peter Galloway)