CAE raises annual profit forecast amid transformation push

MONTREAL · CAE Inc. has raised its earnings forecast for the fiscal year as the Montreal-based flight simulator and pilot training company reports progress on a corporate transformation plan. The company now expects adjusted earnings per share of between $1.28 and $1.35 for the year ending March 31, 2027, up from a previous forecast of $1.21 to $1.28. CAE also boosted its outlook for adjusted segment operating income margins, while forecasts for revenue and cash conversion rate were unchanged. For its latest quarter ended Sept. 30, CAE reported net income attributable to shareholders of $58.6 million, or 18 cents per share. That was down about 21 per cent from $73.9 million in the same period a year earlier. Revenue slipped 2.6 per cent year-over-year to $1.20 billion. On an adjusted basis, earnings were 33 cents per share, beating the consensus analyst forecast of 26 cents. Free cash flow was $180 million, far exceeding analyst expectations of $17 million.

Chief executive Matthew Bromberg said the results show the company's strategic shift is gaining traction. "Eighteen months into the role, I’m often asked if I can see the change occurring in the organization and the answer is yes," Bromberg told analysts on a call Thursday. "We’re becoming more focused on our end markets. We’re becoming more focused on profitable growth and more focused on cash flow generation. And the results are starting to be clear."

Bromberg, a former U.S. Navy submarine commander who took over last year, is working to boost profits and cash flow after a 15-year expansion. His transformation plan includes revamping the civil training network to reduce infrastructure costs and selling non-core assets. The company announced last month it struck a deal to sell its Flightscape aviation software business to Geneva-based technology firm SITA for US$500 million including debt. Bromberg said CAE is on track to sell several smaller assets as well.

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Bank of Montreal analyst Fadi Chamoun said in a research note that Bromberg and his team are "executing well." The "results reinforce our conviction in the upside potential for the shares," Chamoun wrote. Major investor Browning West has said Bromberg should be able to double the company’s earnings per share over the next three to four years. The CEO said Thursday he's more than halfway through key milestones on the transformation plan.

CAE said actions taken to mitigate the impact of conflict in the Middle East, including redeploying training activities to other sites, have been effective. Earlier this year, Bromberg said the war was hurting operating profit by forcing the cancellation of pilot training sessions in the region. The company warned that if the conflict intensifies and regional conditions deteriorate, its business could come under more pressure. Bromberg said the company remains focused on continuing its year-old plan, which aims to drastically reduce the manufacturer’s global footprint by the end of the year.

With files from The Canadian Press, The Globe and Mail and BNN Bloomberg