cae

Both CAE and Nordion are developing new products that help them tap into profitable new markets. That makes both companies less reliant on their core businesses—and enhances their long-term prospects. CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.3 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) spends around 10% of its annual revenue of $1.8 billion on research. That helps it develop simulators for new planes, like the Boeing 787 Dreamliner and Airbus A380. The company is also using these funds to apply its expertise to new fields. For example, CAE is now making simulators and other products, including lifelike mannequins, to train paramedics and medical students. It is also focusing on the mining industry: Right now, mining firms are using software that CAE developed to plan new mines and measure reserves. These new businesses, which both have strong growth potential, now supply 5% of CAE’s revenue....

PENGROWTH ENERGY CORP., $6.40, Toronto symbol PGF, is cutting its monthly dividend by 42.9%, to $0.04 a share from $0.07, starting with the August 2012 payment. That caused the stock to fall 3% on Friday. Even after the cut, the new annual dividend rate of $0.48 a share still yields 7.5%. The company’s selling prices for oil and natural gas are falling, and it wants to conserve cash for potential acquisitions and investments in promising new projects, such as its Lindbergh oil sands development in Alberta....

CAE INC. $9.88 (www.cae.com) has won several contracts from military clients for flight simulators and other training equipment. In all, these deals are worth $110 million, which is equal to 6% of CAE’s annual revenue of $1.8 billion. Best Buy.

BOMBARDIER INC., Toronto symbols BBD.A $4.04 and BBD.B $3.91, rose 5% this week after the company received a firm order for 100 of its Challenger business jets from NetJets Inc., a private company owned by billionaire investor Warren Buffett. In addition to the implied endorsement by Mr. Buffett, this sale is worth $2.6 billion (all amounts except share prices in U.S. dollars), or 13% of Bombardier’s annual sales of $20 billion. The company will begin delivering these planes in 2014. NetJets also has an option to buy an additional 175 planes. If it exercises this option, the value of the entire order would rise to $7.3 billion. And if you include a related long-term contract to maintain these planes, the value of the entire agreement could reach $9.6 billion....

FINNING INTERNATIONAL INC. $23 (www.finning.com) earned $0.39 a share in the three months ended March 31, 2012. That’s down 7.1% from $0.42 a year earlier. If you exclude the costs of installing a new computer system that will make its Canadian operations more efficient, Finning would have earned $0.48 a share in the latest quarter. Revenue rose 15.5%, to $1.5 billion from $1.3 billion, as higher commodity prices prompted mining companies to buy more heavy equipment. The company also raised its quarterly dividend by 7.7%, to $0.14 a share from $0.13. The new annual rate of $0.56 yields 2.4%. Buy. CAE INC. $9.88 (www.cae.com) has won several contracts from military clients for flight simulators and other training equipment. In all, these deals are worth $110 million, which is equal to 6% of CAE’s annual revenue of $1.8 billion. Best Buy. CANADA BREAD CO. LTD. $48 (www.canadabread.ca) is seeing lower demand for its fresh baked goods. At the same time, its costs for wheat and other ingredients are rising. As a result, its earnings fell 62.5% in the first quarter of 2012, to $0.21 a share from $0.56 a year earlier. Sales rose just 0.4%, to $371.8 million from $370.2 million. Hold.

CANADIAN PACIFIC RAILWAY LTD., $74.11, Toronto symbol CP, rose 1% this week after U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees. CP’s chairman, John Cleghorn, and chief executive officer, Fred Green, also resigned. Pershing Square will probably try to install Hunter Harrison, the successful former CEO of CN Rail, as CP’s new chief executive officer. Even if CP hires someone other than Mr. Harrison, the company will continue to work on improving its efficiency by purchasing new locomotives, upgrading its tracks and streamlining its schedules....

CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 257.9 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) makes flight simulators and runs pilot training schools.

In its 2012 third quarter, which ended December 31, 2011, CAE’s revenue rose 10.3%, to $453.1 million from $410.8 million a year earlier.

Demand for the company’s pilot training services continues to rise as airlines upgrade their fleets. That pushed up revenue by 13% at CAE’s civil division (which supplies 45% of the company’s overall revenue).

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CANADIAN PACIFIC RAILWAY LTD., $76.45, Toronto symbol CP, reported higher-than-expected earnings this week. In the three months ended March 31, 2012, the company’s earnings soared 317.6%, to $142.0 million from $34.0 million a year earlier. Earnings per share rose 310.0%, to $0.82 from $0.20, on more shares outstanding. That beat the consensus estimate of $0.75 a share. Severe winter weather and avalanches in B.C. delayed the company’s trains and depressed the year-earlier results. This was the main reason for the earnings jump....

CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 257.9 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) makes flight simulators and runs pilot training schools. In its 2012 third quarter, which ended December 31, 2011, CAE’s revenue rose 10.3%, to $453.1 million from $410.8 million a year earlier. Demand for the company’s pilot training services continues to rise as airlines upgrade their fleets. That pushed up revenue by 13% at CAE’s civil division (which supplies 45% of the company’s overall revenue)....

PLEASE NOTE: Our next Hotline will go out on Friday, April 13, 2012. MOLSON COORS CANADA INC., Toronto symbols TPX.A $45.24 and TPX.B $41.10, is buying StarBev L.P., which owns nine breweries in central and eastern Europe. StarBev brews over 20 local beers, as well as major international brands, such as Stella Artois, Beck’s and Lowenbrau, under license. Molson Coors aims to close the deal by June 30, 2012....