CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 257.9 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) makes flight simulators and runs pilot training schools.
In its 2012 third quarter, which ended December 31, 2011, CAE’s revenue rose 10.3%, to $453.1 million from $410.8 million a year earlier.
Demand for the company’s pilot training services continues to rise as airlines upgrade their fleets. That pushed up revenue by 13% at CAE’s civil division (which supplies 45% of the company’s overall revenue).
Revenue from military clients (55% of the total) rose just 1%. That’s because ballooning government deficits are forcing many countries to hold off on equipment purchases. Even so, CAE’s defence businesses have a combined order backlog of $2.0 billion.
The company’s earnings jumped 18.4% in the quarter, to $45.6 million, or $0.18 a share, from $38.5 million, or $0.15 a share.
CAE recently won $90 million of contracts for seven flight simulators and other training devices.
As a result, CAE sold 37 simulators in fiscal 2012, up from 29 in 2011. About 60% of these orders came from clients in Asia, followed by the Middle East and the Americas (16% each) and Europe (8%).
CAE is now using its expertise to expand into other fields. For example, it has started making simulators to train paramedics and medical students. It feels these new businesses will supply $120 million of revenue in 2013.
The company likely earned $0.70 a share in fiscal 2012. The stock trades at 14.3 times that estimate. CAE typically spends 10% of its annual revenue on research, so its true p/e ratio is somewhat lower. The $0.16 dividend yields 1.6%.
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