CAE’s strong performance should continue, this Scotia Wealth analyst says

Flight training company CAE Inc. (CAE Stock Quote, Chart TSX:CAE) wowed investors with its latest quarterly numbers, pumping the stock to record highs. And while the ‘what goes up must come down’ theory would seem to apply here, there’s nothing in CAE’s chart to back that up, according to analyst Elliot Fishman of Scotia Wealth, who says the stock should remain a Hold or Buy until further notice.

“It’s another one of those stocks where technical analysis is sort of thrown out the window because it’s been a straight run almost from 2016. There’s nothing that I can tell you to sell it. It’s one of those that if you bought it for a trade, maybe you take some of it off the table. Otherwise, it’s a total guess,” says Fishman, director of US and International Trading at Scotia Wealth, to BNN Bloomberg on May 24.

“It’s at levels that it hasn’t seen, it’s acting great, so it’s a hold or a buy here,” he says. “It looks great in here, it really does. There’s nothing I could add here that would say that you should sell it, with the exception of common sense or for a trade.”

Earlier this month, CAE’s share price surged on its fourth quarter fiscal 2019 results, which beat expectations on earnings, coming in with $127.5 million or an EPS of $0.48 per share compared to analysts’ consensus estimate of $82.3 million or $0.31 per share. Revenue was up a full 42 per cent to $1.02 billion, including a 50-per-cent increase in its civil aviation training segment (up to $593.4 million) and a 34-per-cent rise in defence and security revenue to $387.9 million.

For the fiscal 2019 year, revenue was up 17 per cent to $3.3 billion and EPS was up 13 per cent. President and CEO Marc Parent said fiscal 2019 helped establish CAE as “the worldwide leader in aviation training.

“I am especially pleased with our record $4 billion in annual orders and $9.5 billion order backlog. Our continued success winning our customers’ trust further validates our training strategy and adds to the highly recurring profile of CAE’s business,” said Parent in a press release. “As we look to the fiscal year ahead, we expect CAE to build on the positive momentum in training and to continue to deliver superior and profitable growth.”

CAE’s share price popped 11 per cent on the quarterly release on May 17, although the stock has since pulled back. For 2019, CAE is now up 35 per cent, while over the past three years, the stock is up 112 per cent.