cae

CAE INC., $14.81, Toronto symbol CAE, earned $50.6 million in its fiscal 2016 first quarter, which ended June 30, 2015, up 15.5% from $43.8 million a year earlier. Earnings per share rose at a slower pace of 11.8%, to $0.19 from $0.17, on more shares outstanding. That beat the consensus estimate of $0.18. Revenue gained 5.9%, to $557.0 million from $526.2 million, but that fell short of the consensus forecast of $571.1 million. About 90% of the company’s revenue comes from overseas, so it’s benefiting from the lower Canadian dollar. CAE gets 60% of its sales by selling flight simulators and pilot-training services to airlines, and this business’s revenue rose 8.8%. The company sold eight simulators during the period and expects its full-year total to be near the 41 it sold in fiscal 2015....

BOMBARDIER INC., Toronto symbols BBD.A $1.75 and BBD.B $1.63, has denied media reports that it’s planning to merge its passenger-railcar business (Bombardier Transportation) with Germany-based Siemens AG. However, the company still plans to sell shares in Bombardier Transportation through an initial public offering later this year—though it will continue to own a majority stake. Bombardier will probably use the cash from this sale to pay down its $8.9-billion U.S. long-term debt, which is a high 315% of its $3.7-billion (Canadian) market cap....

FORTIS INC., $36.28, Toronto symbol FTS, began supplying electricity to St. John’s, Newfoundland, in 1885. The company is now the main power utility in Newfoundland and PEI. As part of diversification plan, Fortis acquired other power utilities in other parts of Canada, as well as in the U.S. and Caribbean. It also invested in office buildings and hotels. The company now wants to focus on its highly successful utilities. As a result, it recently sold its commercial real estate operations for $430 million. This business’s properties, located in New Brunswick, Nova Scotia and Newfoundland and Labrador, included 10 office buildings, one mixed-use office complex and three shopping centres....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 267.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) has won a new contract to train pilots for the U.S. Army and Air Force. As a result, the company will build a new training facility at Dothan Regional Airport in Alabama.

This eight-year deal is worth $200 million U.S. To put that in context, CAE’s revenue was $2.2 billion (Canadian) in the fiscal year ended March 31, 2015. Military clients supply about 40% of the company’s revenue, which cuts its reliance on selling flight simulators to cyclical commercial airlines.

CAE is our #1 buy for 2015.

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IMPERIAL OIL LTD., $46.95, Toronto symbol IMO, has started up the second phase of its Kearl oil sands project in northern Alberta. The company owns 71% of Kearl; ExxonMobil (New York symbol XOM) holds the remaining 29%. Exxon also owns 69.9% of Imperial. Kearl’s first phase began operating in April 2013 and produced an average of 95,000 barrels a day (67,000 to Imperial) in the three months ended March 31, 2015. Imperial’s share of Kearl’s output represented 20% of the company’s overall production of 333,000 barrels. This new phase will ultimately double Kearl’s capacity to 220,000 barrels a day (156,200 to Imperial). The company spent $9 billion on the expansion, which is equal to 23% of its $39.8-billion market cap (or the value of all of its outstanding shares). However, Kearl’s reserves should last 40 years....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 267.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) has won a new contract to train pilots for the U.S. Army and Air Force. As a result, the company will build a new training facility at Dothan Regional Airport in Alabama. This eight-year deal is worth $200 million U.S. To put that in context, CAE’s revenue was $2.2 billion (Canadian) in the fiscal year ended March 31, 2015. Military clients supply about 40% of the company’s revenue, which cuts its reliance on selling flight simulators to cyclical commercial airlines. CAE is our #1 buy for 2015.

CAE INC., $14.85, Toronto symbol CAE, earned $64.1 million, or $0.24 a share, in its fiscal 2015 fourth quarter, which ended March 31, 2015. That’s up 6.8% from $60.0 million, or $0.23, a year earlier. The latest earnings matched the consensus forecast. Revenue rose 9.7%, to a record $631.6 million from $575.7 million, beating the consensus estimate of $627.2 million. CAE gets 58% of its revenue by selling flight simulators and pilot-training services to airlines, and this business’s revenue rose 13.6% during the quarter. CAE sold 10 simulators during the period, bringing the full-year total to 41; it sold a record 48 simulators in fiscal 2014....

CAE INC., $14.74, Toronto symbol CAE, announced this week that it has sold five flight simulators to airlines in the U.S. and Asia. It will also build a new facility in Bogota, Colombia, to train pilots for the Viva Colombia airline under a long-term agreement. With these deals, CAE sold 41 simulators in its 2015 fiscal year, which ended March 31, 2015. It sold a record 48 simulators in fiscal 2014. The company has also won several contracts to upgrade flight simulators and train aircrews for the U.S., U.K., Australian and Italian air forces. CAE’s military businesses supply 40% of its revenue, which cuts its reliance on cyclical commercial airlines....

PLEASE NOTE: Due to the Good Friday holiday, our next Hotline will go out on Thursday, April 2, 2015. CAE INC., $14.86, Toronto symbol CAE, announced this week that it has sold five flight simulators to WestJet and other customers. In all, these orders are worth $70 million, or 3% of CAE’s $2.2 billion of annual revenue. The company has now sold 36 simulators in its 2015 fiscal year, which began April 1, 2014. It sold a record 48 simulators in fiscal 2014....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 265.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) is buying the military flight-training business of BOMBARDIER INC. (Toronto symbols BBD.A $3.12 and BBD.B $3.04; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $5.2 billion; Price-to-sales ratio: 0.4; Dividend suspended in February 2015; TSINetwork Rating: Average; www.bombardier.com).

This business trains pilots for the Royal Canadian Air Force and other NATO countries at facilities in Moose Jaw, Saskatchewan, and Cold Lake, Alberta.

CAE will pay $19.8 million when it closes the deal later this year. This a small sum for both companies, but the new operations are a nice fit with CAE’s other pilot-training businesses. After the sale, Bombardier can focus on its struggling aircraft-manufacturing business, including the upcoming launch of its new CSeries passenger jet.

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