UPDATE 2-Bombardier posts surprise profit, raises earnings guidance

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July 28 (Reuters) - Canada's Bombardier Inc on Friday reported its first quarterly profit in two years and beat earnings expectations, helped by strong performance at its transportation division.

The Montreal-based plane and train manufacturer raised its full-year forecast for earnings before interest and taxes (EBIT) before special items to the top half of a previously forecast range of $580 million to $630 million.

For the quarter, Bombardier reported EBIT before special items of $164 million, up 55 percent from a year earlier. That beat analysts' consensus of $134 million, according to a research note by BMO's Fadi Chamoun.

Bombardier also raised its EBIT margin guidance before special items for its transportation and business jet divisions to approximately 8 percent for the year, from 7.5 percent.

Adjusted net income, which excludes some items, was $39 million, or 2 cents per share, in the second quarter, compared with a loss of $83 million, or 6 cents per share, a year earlier.

Analysts on average had expected Bombardier to lose 1 cent per share, according to Thomson Reuters I/B/E/S.

Bombardier is in the middle of a five-year turnaround plan to improve its financial performance after facing a cash crunch in 2015.

Revenue fell 5 percent to $4.10 billion in the quarter because of a decline in sales in its business aircraft and commercial aircraft segments.

Sales in Bombardier's transportation unit, its biggest, rose to $1.98 billion from $1.96 billion.

Free cash flow usage was in line with expectations at $570 million in the quarter and $1.2 billion year-to-date, as the company brings its new high-end Global 7000 business jet to market next year and ramps up production of its new CSeries single-aisle jet. Bombardier reiterated its full-year guidance of revenue growth in the low-single digits, excluding the impact of currency fluctuations. (Reporting by Allison Lampert in Montreal and Yashaswini Swamynathan in Bengaluru; Editing by Arun Koyyur and Steve Orlofsky)