CAE price target trimmed at National Bank

He’s still a believer in the company, but National Bank Financial analyst Cameron Doerksen, but he does see some challenges ahead for CAE (CAE Stock Quote, Chart, News, Analysts, Financials TSX:CAE).

As reported by The Globe and Mail, Doerksen July 30 reiterated his “Outperform” rating on CAE while chopping his price target from $31.00 to $29.00.

The analyst explains that the stock has become a bit of a tale of two segments.

“We believe CAE appropriately reset its Defense segment last quarter and based on a strong $5.7 billion backlog and growing revenue from better-margin transformational programs, we believe a 6-7-per-cent EBIT margin this year is achievable and a 10-per-cent-plus margin over the long term also realistic,” Doerksen wrote. “In the next couple of quarters, however, Defense segment margins are likely going to be in the 5-per-cent range and investors are likely to remain somewhat skeptical until the company demonstrates a positive margin inflection. We have trimmed our Civil segment growth forecast for CAE, and on our new F2025 estimates, CAE trades at 9.9 times EV/EBITDA, which is a discount to the aerospace peer group which trades at 12 times current year EV/EBITDA.”

At press time, shares of CAE were down 0.5% to $24.77.