CAE stock downgraded by RBC

Good company, middling investment.

RBC Dominion Securities analyst James McGarragle says that’s the situation with CAE (CAE Stock Quote, Chart, News, Analysts, Financials TSX:CAE) right now.

As reported by the Globe and Mail, the analyst May 21 downgraded CAE from “Outperform” to “Sector Perform”, while lowering his price target on the stock from $41.00 to $38.00.

“We view CAE as a well-run company, with exposure to solid long-term trends in pilot training and defense spending,” McGarragle wrote. “However, the shares trade most expensive in our coverage group, and we therefore see these trends as being appropriately reflected at current levels. Moreover, following an impressive turnaround in the company’s defense segment and some near-term macro headwinds that we expect to weigh on Civil results, we see less in the way of catalysts. Net-net, we view solid secular tailwinds as being offset by full valuation, and see risk-reward as well-balanced.”

On May 13, CAE reported its Q4 and fiscal 2025 results. In the fourth quarter the company posted EPS of $0.42 on revenue of $1.28-billion, a topline that was up 13%, year-over-year.

“We delivered an exceptional fourth quarter, capping a strong year across all key financial and operational metrics,” CEO Marc Parent said. “Disciplined execution and efficient capital management drove $289.4 million in free cash flow for the quarter and a record $813.9 million for the year, reflecting a robust cash conversion rate of 211 percent. This performance allowed us to meet our year-end leverage target, further strengthening our balance sheet. We also continued to build momentum for long-term growth and profitability, securing $1.3 billion in adjusted order intake for the quarter and closing with an adjusted backlog of $20.1 billion, up 65% from last year.”