CAE (CAE) Q2 2027 Earnings Report

The call was strongly positive overall. Management highlighted improved profitability, substantially stronger free cash flow, increased Civil utilization, strong Defense execution, progress ahead of schedule on the transformation plan, the USD 500 million Flightscape sale and higher fiscal 2027 guidance. These positives were partly offset by lower consolidated and Civil revenue, weaker Civil profitability, significant ongoing transformation costs and the fact that reported Defense margins benefited from non-recurring tax credits and timing. The highlights significantly outweighed the lowlights.

CAE raised its fiscal 2027 outlook to adjusted earnings per share of $1.28 to $1.35 and adjusted segment operating income margin of 14.9% to 15.4%, while maintaining cash conversion rate guidance of 85% to 95%; Defense is expected to deliver mid-single-digit growth and improved profitability year-over-year, with quarterly results varying based on program milestones, product deliveries and mix, and Civil’s second half is expected to be stronger than the first half, with a higher number of full-flight simulator deliveries expected in Q4, smaller year-over-year margin headwinds, and full-year profitability still expected to remain below the prior-year levels. CAE expects to retire 16 to 18 simulators by the end of this fiscal year, close between 4 and 6 Civil training centers, reduce its Civil network footprint by approximately 500,000 square feet or roughly 10%, retain more than 99% of its Civil revenue, and achieve utilization in the mid-70s, with utilization expected to increase by 400 or 500 basis points; total transformation costs are expected to be between $200 million and $250 million with approximately $100 million of noncash charges, fiscal 2030 annual transformation run rate savings are expected to be $125 million to $150 million, and fiscal 2030 adjusted segment operating income is targeted at $950 million to $1 billion.