CAE Swings to Profit in Q2; Shares Plunge

Shares of CAE (CAE) plunged 10% Thursday despite the company reporting a big jump in revenue and profit in the third quarter of 2021.

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The world leader in aviation training missed expectations as pilots’ use of its signature flight simulator plummeted. (See Insiders’ Hot Stocks on TipRanks)

Revenue & Earnings

Revenue came in at C$814.9 million in the second quarter, an increase of 15.6% from C$704.7 million in the prior-year quarter. Civil Aviation training revenue fell about 1% to C$362.1 million, while Defence and Security revenue rose 38% to C$417.9 million.

Net income attributable to shareholders amounted to C$14 million (C$0.04 per diluted share) in Q2 2021, compared with a loss of C$5.2 million (C$0.02 per diluted share) in Q2 2020.

On an adjusted basis, CAE earned C$53.2 million (C$0.17 per share) in the second quarter of 2021, compared to an adjusted profit of C$34.2 million (C$0.13 per share) a year ago.

Analysts expected CAE to report an adjusted profit of C$0.20 per share on revenue of C$900 million.

Simulator usage fell to 53% of capacity due to a drop in demand for pilot training, although CAE said the key metric has started to rise.

Management Commentary

CAE president and CEO Marc Parent said, “We continue to play offence during this period of disruption, as evidenced by our recent announcement of the proposed acquisition of Sabre’s AirCentre business, which marks our ninth accretive acquisition since the pandemic began.

“As business conditions continue to improve further, we look to extend this posture as it relates to both organic and inorganic growth investment. Our opportunity set continues to look very attractive, and I’ve never been as excited about CAE’s future as I am today.”

Wall Street’s Take

On November 1, TD Securities analyst Tim James reiterated a Hold rating on CAE and raised its price target to C$42 (C$40). This implies 12.2% upside potential.

Overall, CAE scores a Moderate Buy rating among Wall Street analysts based on five Buys, three Holds, and one Sell. The average CAE price target of C$43.12 implies 15.4% upside potential to current levels.