On Wednesday, BMO (TSX:BMO) Capital maintained its positive stance on CAE (TSX:CAE) Inc . (NYSE:CAE:CN) (NYSE: CAE), reiterating an Outperform rating with a price target of Cdn$34.00. The affirmation follows CAE's fourth quarter and fiscal year 2024 results which aligned with preliminary figures released earlier on May 22. Despite ongoing underperformance in the Defense segment, the firm believes the Civil segment's robust outlook will drive the company's valuation.
CAE's Defense segment continues to face challenges, yet the firm anticipates only a modest and gradual improvement in this area. Nevertheless, the Civil segment is expected to be the primary contributor to CAE's earnings before interest and taxes (EBIT), projected to account for 84% over the next two years. This segment's positive trajectory underpins the analyst's valuation of the company.
The analyst's commentary highlighted the Civil segment's favorable prospects, which were detailed in a recent in-depth analysis. The segment's outlook appears to be a key factor in sustaining CAE's stock valuation, despite the need for demonstrable progress in the Defense segment to drive a more significant valuation improvement.
The price target of Cdn$34.00 set by BMO Capital reflects confidence in the Civil segment's ability to bolster CAE's overall performance. The firm's outlook suggests that while the Defense segment's recovery may be slow, the Civil segment's strength is a substantial factor in maintaining the Outperform rating.
Investors are thus provided with a snapshot of CAE's business, where the Civil aviation training solutions are expected to remain a dominant earnings driver, while the Defense segment's recovery remains a secondary, longer-term consideration in the company's valuation.
InvestingPro Insights
As BMO Capital maintains its positive outlook on CAE Inc ., citing the Civil segment's robust outlook as a key valuation driver, real-time data from InvestingPro offers additional insights. The company's market capitalization stands at $5.91 billion, with a forward P/E ratio for the last twelve months as of Q4 2024 at 29.25, indicating market expectations of future earnings growth. Despite not paying dividends, analysts are optimistic about CAE's net income growth this year.
Two InvestingPro Tips that may interest investors are that CAE is expected to become profitable this year, and the stock trades with low price volatility, which could appeal to risk-averse investors. These factors, combined with the Civil segment's performance, could offer a stable investment opportunity. For those seeking a deeper analysis, there are 7 additional tips available on InvestingPro. Enrich your investment strategy and get an extra 10% off a yearly or biyearly Pro and Pro+ subscription with coupon code PRONEWS24.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.