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CAE Inc (TSE:CAE)
TSX:CAE
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CAE
(TSX:CAE)74Outperform
Positive Factors
Financial Performance
CAE announced CEO succession plan and Q2/F25 results that handily beat expectations in both Civil and Defense.
Market Opportunities
CAE has a significant opportunity in the Civil aviation market going forward and is well positioned to capitalize on a very attractive growth algorithm in this segment.
Negative Factors
Leadership Changes
Executive reshuffle continues with CAE announcing Marc Parent will be stepping down from his role as CEO, adding uncertainty while the company works to prove past missteps are behind them.
CAE (CAE) vs. S&P 500 (SPY)
Market Cap
$11.05B
Dividend YieldN/A
Average Volume (3M)783.71K
Price to Earnings (P/E)―
Beta (1Y)0.78
Revenue Growth1.44%
EPS Growth-183.14%
CountryCA
Employees13,000
SectorIndustrials
Sector Strength66
IndustryAerospace & Defense
Share Statistics
EPS (TTM)-0.73
Shares Outstanding319,793,820
10 Day Avg. Volume916,109
30 Day Avg. Volume783,707
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.39
Price to Cash Flow (P/CF)6.40
P/FCF Ratio7.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$40.83Price Target Upside18.13% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
CAE Business Overview & Revenue Model
Company DescriptionCAE, Inc. engages in the provision of training and development of integrated training solutions for the defence and security markets, commercial airlines, business aircraft operators, helicopter operators, aircraft manufacturers, and healthcare education and service providers. It operates through the following segments: Civil Aviation Training Solutions, Defence and Security, and Healthcare. The Civil Aviation Training Solutions segment offers training solutions for flight, cabin, maintenance and ground personnel in commercial, business and helicopter aviation, a complete range of flight simulation training devices, as well as ab initio pilot training and crew sourcing services. The Defence and Security segment includes training systems integrator for defence forces across the air, land and naval domains, and for government organizations responsible for public safety. The Healthcare segment designs and manufactures simulators, audiovisual solutions, and courseware for training of medical and allied healthcare students and clinicians in educational institutions, hospitals and defence organizations. The company was founded by Kenneth R. Patrick on March 17, 1947 and is headquartered in Montreal, Canada.
How the Company Makes MoneyCAE generates revenue through multiple streams, primarily driven by the sale and support of simulation products and training services. In the civil aviation sector, CAE earns income from providing pilot training programs, flight simulators, and maintenance services. The defense and security segment contributes to revenue through the sale of military training systems and operational support services. In the healthcare sector, CAE generates income by providing simulation-based training solutions to medical and educational institutions. Additionally, CAE benefits from long-term service contracts and partnerships with airlines, defense organizations, and healthcare providers, which ensure a steady flow of revenue. The company's strategic partnerships and technological advancements further enhance its competitive edge and financial performance.
CAE Financial Statement Overview
Summary
CAE presents a mixed financial performance. While revenue growth and gross margins are commendable, profitability remains a concern with negative net margins. The balance sheet is stable, but leverage is relatively high, requiring careful debt management. Strong free cash flow highlights operational efficiency in cash generation, although profitability challenges persist. Continued focus on reducing costs and improving operational efficiency is essential for enhancing financial health.Income Statement
The company shows strong revenue growth with a 8.1% increase from the previous year to TTM (Trailing-Twelve-Months). Gross profit margin remains healthy at approximately 26.1% in TTM, indicating effective cost management. However, a significant net loss in TTM reflects challenges in achieving profitability, possibly due to increased operating expenses or other non-operational factors. EBITDA margin improved to 7.3% in TTM, but EBIT margin is negative, highlighting operational inefficiencies or extraordinary expenses.65
Positive
Balance Sheet
CAE exhibits a solid equity base with an equity ratio of 42.2% in TTM, indicating financial stability. The debt-to-equity ratio is relatively high at 0.78, signaling a reliance on debt financing which could imply risk if interest rates rise. Return on equity is negative due to net losses, suggesting inefficiencies in utilizing equity to generate profits.70
Positive
Cash Flow
The company has demonstrated strong free cash flow growth, with a substantial increase to CAD 355 million in TTM, indicating healthy cash generation capabilities. The operating cash flow to net income ratio is robust, reflecting the ability to convert sales into actual cash, despite negative net income. However, free cash flow to net income is constrained by negative net profits, suggesting room for improvement.75
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 4.56B | 4.28B | 4.20B | 3.37B | 2.98B | 3.62B | Gross Profit |
| 1.19B | 1.15B | 1.17B | 955.50M | 765.00M | 1.08B | EBIT |
| 591.00M | -185.40M | 474.00M | 284.20M | 48.40M | 537.10M | EBITDA |
| 331.10M | 117.70M | 747.00M | 548.10M | 351.00M | 815.90M | Net Income Common Stockholders |
| -231.30M | -304.00M | 222.70M | 141.70M | -47.20M | 311.40M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 302.50M | 160.10M | 217.60M | 346.10M | 926.10M | 946.50M | Total Assets |
| 11.08B | 9.83B | 10.44B | 9.58B | 8.75B | 8.48B | Total Debt |
| 3.66B | 3.07B | 3.25B | 3.05B | 2.35B | 3.31B | Net Debt |
| 3.35B | 2.91B | 3.03B | 2.70B | 1.43B | 2.37B | Total Liabilities |
| 6.32B | 5.53B | 5.85B | 5.49B | 5.54B | 5.91B | Stockholders Equity |
| 4.67B | 4.22B | 4.51B | 4.01B | 3.14B | 2.49B |
| Cash Flow | Free Cash Flow | ||||
| 355.00M | 126.30M | -16.90M | 55.40M | 203.00M | 161.10M | Operating Cash Flow |
| 795.80M | 566.90M | 408.40M | 418.20M | 366.60M | 545.10M | Investing Cash Flow |
| -468.30M | -215.40M | -400.70M | -2.24B | -343.40M | -495.90M | Financing Cash Flow |
| -163.30M | -395.30M | -152.60M | 1.26B | -21.30M | 443.40M |
CAE Technical Analysis
Neutral
34.56
Price Trends
34.86
Negative
32.08
Positive
28.50
Positive
Market Momentum
0.12
Positive
47.31
Neutral
17.09
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CAE, the sentiment is Neutral. The current price of 34.56 is below the 20-day moving average (MA) of 35.02, below the 50-day MA of 34.86, and above the 200-day MA of 28.50, indicating a neutral trend. The MACD of 0.12 indicates Positive momentum. The RSI at 47.31 is Neutral, neither overbought nor oversold. The STOCH value of 17.09 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:CAE.
CAE Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $11.05B | ― | -4.95% | ― | 1.44% | -183.14% | |
66 Neutral | C$566.29M | 29.30 | 2.53% | 1.00% | 8.96% | ― | |
66 Neutral | C$2.67B | 38.63 | 5.95% | ― | 18.99% | 52.78% | |
62 Neutral | C$550.26M | ― | -21.86% | ― | 27.28% | 51.71% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
58 Neutral | C$116.89M | ― | -52.42% | ― | 86.62% | 94.45% |
* Industrials Sector Average
Performance Comparison
TSE:CAE
CAE
35.37
8.83
33.27%
TSE:BLN
Blackline Safety
6.69
2.37
54.86%
TSE:IMP
Intermap Technology
1.85
0.98
112.64%
TSE:MAL
Magellan Aerospace
10.09
2.11
26.44%
TSE:MDA
MDA Ltd
23.09
8.13
54.34%
CAE Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: 3.57% | Next Earnings Date: Jun 3, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance with record free cash flow and backlog, significant growth in the Civil and Defense segments, and strategic partnerships. However, challenges in the commercial aviation training market and higher finance expenses presented some concerns.Highlights
Record Free Cash Flow and Backlog
The company generated a record $410 million in free cash flow and secured $2.2 billion in new orders, leading to a record adjusted backlog of $20.3 billion.
Civil Segment Growth
Civil segment revenues grew 21% year-over-year to $752.6 million, with a record $8.8 billion total Civil adjusted backlog, up 44% year-over-year.
Defense Segment Performance
Defense recorded $707 million in orders with a book-to-sales ratio of 1.5x and a record $11.5 billion in defense-adjusted backlog, up 104% year-over-year. Adjusted segment operating income increased 88% to $39.2 million.
Strategic Partnerships and Innovations
CAE signed orders for more than $60 million with major airlines and announced Turkish Airlines as a customer for its next-generation software solutions. Inaugurated its first air traffic services training center in collaboration with NAV Canada.
Recognition and Awards
CAE was recognized as one of Canada's Top 100 Employers for the third consecutive year and earned a spot on Forbes Canada's Best Employers list for 2025.
Lowlights
Commercial Aviation Training Softness
Commercial aviation training in the Americas showed unexpected softness, with pilot hiring remaining modest and some airline customers deferring training bookings due to aircraft supply chain challenges.
Higher Net Finance Expense
Net finance expense increased to $56.6 million this quarter from $52.4 million last year due to higher lease liabilities and additional borrowings.
Delayed Ramp-up in Civil Aviation
The ramp-up of commercial aircraft deliveries is taking longer than expected, impacting initial training demand in the Americas, leading to the adjusted segment operating income growth being modestly below the previous outlook.
Company Guidance
During the CAE Third Quarter Financial Results Conference Call for Fiscal Year 2025, the company reported a record $410 million in free cash flow. The quarter also saw $2.2 billion in new orders, culminating in a record adjusted backlog of $20.3 billion. In the Civil segment, CAE recorded $1.5 billion in orders, achieving a two-times book-to-sales ratio with a 21% increase in revenue compared to Q3 of the previous year. The Civil segment ended the quarter with a record $8.8 billion total adjusted backlog, up 44% year-over-year. In Defense, the company recorded $707 million in orders, achieving a book-to-sales ratio of 1.5x and a record $11.5 billion adjusted backlog, up 104% year-over-year. Consolidated revenues were $1.22 billion, a 12% increase from last year, with an adjusted segment operating income of $190 million, up 31%. The adjusted EPS for the quarter was $0.29. The company remains focused on its deleveraging objectives, with a net debt position of approximately $3.4 billion and a net debt to adjusted EBITDA ratio of 3.36x.CAE Corporate Events
Business Operations and StrategyFinancial Disclosures
CAE Inc. Achieves Record Financial Growth in Q3 Fiscal 2025
Positive
Feb 13, 2025
CAE Inc. reported a strong third quarter for fiscal 2025, with significant financial growth marked by a 12% increase in revenue to $1.223 billion and a substantial rise in earnings per share from $0.18 to $0.53. The company’s operating income doubled from the previous year, driven by a successful SIMCOM transaction and increased order intake in both civil and defense sectors. CAE’s strategic initiatives, including enhancing its stake in SIMCOM and securing long-term training agreements, have bolstered its market position. The company also achieved a record $410 million in free cash flow and a backlog exceeding $20 billion, underpinning its robust future prospects. CAE’s recognition as one of Canada’s top employers further underscores its strong corporate culture and industry standing.
Executive/Board ChangesBusiness Operations and Strategy
CAE Inc. Announces Strategic Board Changes
Positive
Feb 13, 2025
CAE Inc. announced the appointment of four new directors to its Board, including Calin Rovinescu as Chair, signaling a strategic shift towards renewed leadership. This change reflects stakeholder consultations and aims to guide CAE’s growth and value creation, maintaining its strong position in the aerospace and defense markets. The appointments coincide with the retirement of four directors who have overseen significant company growth, emphasizing a seamless leadership transition.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.