BMO Capital Markets has sustained its positive stance on CAE Inc . (NYSE:CAE: CN) (NYSE: CAE), a company specializing in simulation technologies and training services for aviation and defense. The firm reiterated an Outperform rating while maintaining a price target of Cdn$33.00.
The endorsement comes even as BMO Capital acknowledges potential near-term impacts on CAE's training activities due to more challenging industry supply chains. The challenges have been causing further delays in aircraft deliveries by original equipment manufacturers (OEMs), which could, in turn, affect CAE's Civil segment.
Despite these headwinds, BMO Capital expects CAE's Defense segment to continue its gradual recovery, aiming for an EBIT margin between 6% and 7%. The analyst's outlook reflects a nuanced view of CAE's prospects, recognizing sector-specific issues while anticipating overall resilience in the company's performance.
In other recent news, CAE Inc. secured a $1.7 billion contract to provide the Royal Canadian Air Force with a comprehensive pilot training program. The contract, spanning 25 years, includes live flying, simulation, and ground school instruction, and is part of the Future Air Crew Training program.
CAE is also expected to deliver a suite of simulators and training devices for various aircraft fleets. In financial news, CAE reported orders worth $1.2 billion and an adjusted backlog reaching a record $17 billion in the first quarter of fiscal year 2025.
Despite a lower utilization of commercial aviation training, the company projects a rise in revenue, margins, and a 10% annual adjusted segment operating income growth in fiscal 2025. Morgan Stanley has downgraded CAE stock from Overweight to Equalweight due to revised margin expectations for the company's Civil Aviation business.
InvestingPro Insights
While BMO Capital Markets maintains an optimistic outlook on CAE Inc., recent data from InvestingPro provides additional context to the company's financial situation. CAE's market capitalization stands at $5.87 billion, reflecting its significant presence in the simulation and training industry. The company's revenue for the last twelve months reached $3.17 billion, with a modest growth of 6.21% year-over-year, aligning with BMO's expectation of resilience despite industry challenges.
InvestingPro Tips highlight that CAE's net income is expected to grow this year, which could support BMO's Outperform rating. This projection is particularly noteworthy given that CAE has not been profitable over the last twelve months, with a negative P/E ratio of -25.07. However, analysts predict the company will return to profitability this year, potentially justifying the maintained price target.
The volatility in CAE's stock price, as noted by InvestingPro, may reflect the market's reaction to the industry supply chain issues mentioned in BMO's analysis. Investors should also be aware that CAE's short-term obligations exceed its liquid assets, which could be a factor to watch as the company navigates the current challenging environment.
For those seeking a more comprehensive analysis, InvestingPro offers 6 additional tips on CAE, providing deeper insights into the company's financial health and market position.
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