CAE, Inc. (USA) (NYSE:CAE)
Canadian CAE, Inc. (USA) (NYSE:CAE) is involved in training and services for civil and military employees, as well as the production of simulation products for both end markets. The company’s growth engine appears to be in civil training, where it is inking contracts with the likes of LAN, TAM, and numerous other overseas airlines, as well as GE Capital Aviation Services and Ryannair. Unfortunately, though, margins are under pressure. This might be partly due to the need to integrate its recent acquisition of Oxford Aviation Academy Luxembourg.
Elsewhere, the civil product market is trending positively. CAE, Inc. (USA) (NYSE:CAE) may be up against some restraints from defense budget reductions in its military businesses. In all, it is probably positioned to perform better after the current quarter, when profitability of the civil training business is improved.
Thus, at its recent price quote, CAE, Inc. (USA) (NYSE:CAE) shares offer an opportunity for upside. Analyst estimates and projections could prove conservative as the company continues to enter new deals and possibly further acquisitions. Otherwise, additional setbacks in the civil training unit may take a toll on results.
Now may not seem the ideal time to invest in military suppliers, as budget cuts are hampering results for many. Nevertheless, these niche players have positive momentum on their side. Investments in profitable business lines can be a boon to companies’ bottom lines, as may be the catalysts for FLIR Systems, Inc. (NASDAQ:FLIR) and CAE, Inc. (USA) (NYSE:CAE). All three here would benefit from cost containment activity, given their positive revenue trends and narrowing margins. Such improvements might help to lift their stocks further over the course of this year and beyond.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Defense Contractors You May Have Missed originally appeared on Fool.com.
Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.