The flight-simulator maker is ready to build on its improving sales with help from a key acquisition and a successful restructuring plan.
CAE INC. (Toronto symbol CAE; www.cae.com) is the world’s largest maker of flight simulators for commercial airlines and military clients. It also trains pilots.
The company has applied its simulator expertise to new areas. These include mannequins for teaching paramedics, nurses and medical students. This business now supplies 5% of CAE’s overall revenue.
The company’s revenue rose 38.0%, from $1.8 billion in 2012 to $2.5 billion in 2016 (fiscal years end March 31). That’s partly due to its $279.3 million purchase of Oxford Aviation Academy in 2012. It operates flight schools in the U.K., the U.S., Europe and Asia.
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CAE’s earnings rose from $0.70 a share (or a total of $182.0 million) in 2012 to $0.74 a share (or $194.3 million) in 2013. Earnings dipped to $0.73 a share (or $191.1 million) in 2014, but rebounded to $0.76 a share (or $204.1 million) in 2015, and to $0.86 a share (or $230.5 million) in 2016.
In its fiscal 2017 second quarter, ended September 30, 2016, the company earned $48.3 million, or $0.18 a share. That’s down 35.9% from $75.3 million, or $0.28, a year earlier. Those year-earlier earnings benefitted from a $17.2 million tax recovery. If you disregard all unusual items, earnings per share in the quarter gained 22.2%, to $0.22 from $0.18. Overall revenue rose 3.0%, to $635.5 million from $616.8 million. CAE has now sold 26 flight simulators since the start of fiscal 2017. It sold a record 53 simulators in 2016.
The company ended the September quarter with a record backlog of $6.5 billion (51% civilian orders, 49% military). That’s equal to 2.6 times its annual revenue.
CAE recently completed its $25.7 million acquisition of the pilot-training operations of Lockheed Martin (New York symbol LMT). This business instructs pilots in flying a variety of commercial jet planes made by Boeing and Airbus. The new operations should add about $50 million to CAE’s annual revenue.
The company is in a strong position to make more acquisitions. As of September 30, 2016, its long-term debt of $1.2 billion was a moderate 24% of its market cap. It also held cash of $343.3 million, or $1.28 a share.
CAE recently completed a restructuring plan, which involved cutting 4% of its workforce and making better use of its training facilities. The plan should add between $7 million and $10 million to its earnings for the second half of fiscal 2017. The company expects that savings to rise to around $20 million annually by 2018.
The restructuring should lift CAE’s earnings in 2017 to $0.98 a share. The stock trades at a reasonable 19.4 times that forecast. The $0.32 dividend yields 1.7%.
I would agree that CAE is a good investment but question if one can expect it to do any of the “heavy lifting” in a portfolio or provide a decent income at the current dividend. I would be interested to hear if CAE could double in price over the next 5 to 7 years. Probably not.
ve been wondering how much more upside this stock has left in it. I remember too well TSI `s total botch of the rise in Teck Resources a couple years ago when it hit above $ 60 a share and TSI kept saying buy all the back down to under $ 4 bucks. TSI never says “take profits” or “hold only for dividend” or “preserve your gains” and only says “sell” when the company`s stock price is staring at the abyss. Look at TSI`s comments on Pengrowth –same thing but now at the bottom it says hold. Previously it said sell for Penn West, now Obsidian, and it did better than Pengrowth. TSI`s record especially with Natural resources stinks. Its record on Industrials –we`ll wait and see what happens with CAE but put in your stops !!
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I would agree that CAE is a good investment but question if one can expect it to do any of the “heavy lifting” in a portfolio or provide a decent income at the current dividend. I would be interested to hear if CAE could double in price over the next 5 to 7 years. Probably not.
ve been wondering how much more upside this stock has left in it. I remember too well TSI `s total botch of the rise in Teck Resources a couple years ago when it hit above $ 60 a share and TSI kept saying buy all the back down to under $ 4 bucks. TSI never says “take profits” or “hold only for dividend” or “preserve your gains” and only says “sell” when the company`s stock price is staring at the abyss. Look at TSI`s comments on Pengrowth –same thing but now at the bottom it says hold. Previously it said sell for Penn West, now Obsidian, and it did better than Pengrowth. TSI`s record especially with Natural resources stinks. Its record on Industrials –we`ll wait and see what happens with CAE but put in your stops !!