Deteriorating Aviation Market May Drag on CAE Orders

Aug.11.09 | About: CAE Inc. (CAE)

With the continued erosion of the civil aviation market, Chris Murray, CIBC World Markets analyst, said he wouldn’t be surprised if CAE Inc. (NYSE:CAE), the leading manufacturer of full-flight simulators, reduced its order forecast for the remainder year when it releases its first quarter results Wednesday.

Management’s current guidance of 20 full-flight simulator sales this year comes amid the continued “decay” of the large commercial aircraft market, and while CAE’s military business remains robust, new orders for commercial aircraft have been scarce at Boeing (NYSE:BA) and Airbus this year.

This may also lead to a smaller order book at CAE for simulators this year, Mr. Murray said.

He said in a note to clients:

We believe there are further shocks coming to the civil segment, expecting a substantial further delay announcement from Boeing on the 787 program and a 737 and A320 family production rate cut in 2010.

Mr. Murray, who has a “sector performer” rating on the stock, said he expects earnings per share of C15¢ at CAE for the first quarter of fiscal 2010, slightly lower than consensus of C16¢ a share.

He added:

While CAE has a very robust military platform and good growth opportunities in these segments, our outlook continues to be shaped by our expectations for the civil segments, where we remain cautious about a number of potential negative surprises.