CAE INC. $15 – Toronto symbol CAE

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 269.3 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.0%; TSINetwork Rating: Average; www.cae.com) earned $47.7 million in its fiscal 2016 second quarter, which ended September 30, 2015, up 13.6% from $42.0 million a year earlier. Earnings per share rose at a slower pace of 12.5%, to $0.18 from $0.16, on more shares outstanding.

Revenue gained 16.5%, to $616.8 million from $529.4 million. About 90% of the company’s revenue comes from foreign customers, so it’s benefiting from the lower Canadian dollar.

Sales of flight simulators and pilot-training services to airlines (59% of total revenue) jumped 23.4%. CAE sold 16 simulators during the quarter and expects its full-year total to be near the 41 it sold in fiscal 2015.

The company’s military sales (37%) rose 8.2% after it won new contracts from the U.S. and German air forces. Sales of medical-simulation products (4%), such as mannequins for training nurses, rose 4.5%.

CAE’s order backlog is now a record $6.4 billion, which is up 32.6% in the past year and equal to 2.7 years’ worth of revenue. The company will probably earn $0.84 a share for all of fiscal 2016, and the stock trades at a reasonable 17.9 times that forecast. The $0.30 dividend yields 2.0%.

CAE is our #1 buy for 2015.

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