CAE downgraded at Desjardins

Ahead of the company’s fourth quarter results, Desjardins Securities analyst Benoit Poirier has cut his rating on CAE (CAE Stock Quote, Chart, News, Analysts, Financials TSX:CAE).

The analyst says the stock is looking fully valued.

“With CAE up 8 per cent since we published on 3Q, we believe the share price already reflects the upcoming potential catalysts (dividend or NCIB introduction and some problematic contract costs pulled forward),” he wrote. “As shown by the muted/negative reactions to the defense leadership and board changes, we believe CAE will be range-bound for some time and see better opportunities to deploy capital in our A&D coverage universe (our targets for HRX and BBD both imply 29-per-cent potential returns vs only 8 per cent for CAE).”

As reported in the Globe and Mail, Poirier May 21 lowered his rating on CAE from “Buy” to “Hold”, while maintaining his $30.00 price target on the stock.

The analyst says investor shouldn’t expect too much from the upcoming results.

“We see a low probability of the FY25 guidance surprising to the upside,” he concluded. “We do not expect another year of mid- to high-teens growth in civil adjusted operating income (low- to mid-teens more likely) given some North American airlines are beginning to cut capacity and slow hiring due for several reasons (demand, GTF and Boeing issues). Another $50-million year-over-year capex increase is possible given the network investments needed (occurred in 4Q FY23; consensus expecting flat). For the defense segment, we do not expect any guidance given the restricted visibility.”