CAE stock downgraded by Morgan Stanley amid pilot hiring slowdown By Investing.com

On Friday, Morgan Stanley adjusted its stance on CAE Inc . (NYSE::CN) (NYSE: CAE) stock, downgrading it from Overweight to Equalweight and reducing the price target to C$26.00 from the previous C$31.00.

The firm cited revised margin expectations for the company’s Civil Aviation business and a decrease in the forecasted price-to-earnings (P/E) multiple for the fiscal year 2026 as the primary reasons for the adjustment.

The downgrade reflects a more cautious outlook on CAE’s near-term performance, particularly within its commercial aviation training subsegment. Industry headwinds, such as aircraft delivery delays from manufacturers like Boeing (NYSE:) and Airbus, have prompted some airlines to temporarily scale back pilot hiring.

These factors have led to a reduction in Morgan Stanley’s adjusted operating profit estimate for CAE’s Civil Aviation sector by approximately 4% for fiscal year 2025 and by about 2% from fiscal year 2026 to fiscal year 2028.

Morgan Stanley’s revised P/E multiple for CAE now stands at 19 times, down from 21 times. This change is attributed to the trimmed financial forecasts and the recognition of industry challenges that could impact the company’s growth trajectory.

Despite the downgrade, Morgan Stanley acknowledges CAE’s potential to benefit from positive long-term industry trends, such as the increasing demand for pilots and higher defense spending. However, the firm also notes that short- and medium-term execution risks are likely to limit the stock’s upside potential, leading to a more balanced risk-reward scenario for investors.

In other recent news, CAE Inc. has been actively sharing updates with investors. The company reported its first quarter financial results for fiscal year 2025, noting a substantial growth in its civil market solutions. Orders worth $1.2 billion were booked, with an adjusted backlog reaching a record $17 billion.

Despite lower utilization in commercial aviation training, CAE projects a rise in revenue, margins, and a 10% annual adjusted segment operating income growth in fiscal 2025.

In addition to financial updates, CAE shareholders have elected a new board of directors, with most nominees receiving over 90% approval. This leadership change is expected to guide CAE in its ongoing efforts to digitalize the physical world and deploy software-based simulation training and critical operations support solutions.

Another significant development was the change in the executive team, with CFO Sonya Branco stepping down and Constantino Malatesta assuming the role as interim CFO. The defense sector of the company reported $422 million in orders and a $10.4 billion adjusted backlog. These recent developments highlight CAE’s commitment to transparency and its active engagement with investors and stakeholders.

InvestingPro Insights

In light of Morgan Stanley’s recent downgrade of CAE Inc., it’s valuable to consider additional insights from InvestingPro. Real-time data indicates a market capitalization of $5.74 billion USD for CAE, which is a significant figure for investors to assess the company’s size and market value. The P/E ratio, a critical metric for valuation, stands at -22.47, reflecting the challenges outlined by Morgan Stanley. However, analysts predict a shift towards profitability for CAE this year, which could alter the P/E landscape if earnings improve as anticipated.

InvestingPro Tips suggest that CAE’s net income is expected to grow this year, aligning with Morgan Stanley’s recognition of positive long-term industry trends. Nonetheless, the volatility in stock price movements—highlighted by an 8.07% return over the last week—suggests that short-term risks are indeed present, as Morgan Stanley noted. Moreover, with nine analysts having revised their earnings downwards for the upcoming period, it underscores the need for cautious optimism among investors.

For those seeking a deeper analysis, InvestingPro offers additional tips on CAE, which could provide further clarity on the company’s financial health and stock performance. These insights, coupled with Morgan Stanley’s assessment, can help investors make more informed decisions regarding their interest in CAE Inc.

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