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Introduction & Market Context
CAE Inc . (NYSE:CAE) presented its third-quarter fiscal year 2025 results on February 14, 2025, highlighting record backlogs across its business segments and maintaining its outlook for the year. The global leader in aviation training and defense simulation continues to benefit from structural tailwinds in both civil aviation and defense markets, with particularly strong momentum in its defense business.
The company operates in a favorable market environment with projected needs for 1.3 million new commercial and business aviation personnel by 2032, while defense budgets across key allied nations are forecast to grow at a 3.6% CAGR through FY29. CAE (TSX:CAE)’s positioning across these sectors is reflected in its revenue mix of 57% from Civil Aviation and 43% from Defense & Security, with operations spanning more than 40 countries through 240+ locations.
As shown in the following global presence overview, CAE has established a diversified geographic footprint with nearly half of its revenue coming from the United States:
Quarterly Performance Highlights
The most striking achievement in CAE’s Q3 FY25 results is the exceptional growth in its order backlog. The Defense & Security segment reported a record adjusted backlog of $11.5 billion, representing a remarkable 104% year-over-year increase. The Civil Aviation segment also posted strong results with a record adjusted backlog of $8.8 billion, up 44% from the previous year.
These impressive backlog figures are supported by strong book-to-sales ratios of 2.19x for Defense & Security and 1.42x for Civil Aviation on a trailing twelve-month basis, indicating robust future revenue streams.
The following chart illustrates the substantial backlog growth across both business segments:
While specific quarterly financial metrics were included in the presentation, the company’s financial highlights show year-over-year comparisons for key metrics including revenue, operating income, adjusted EPS, and free cash flow:
Strategic Positioning & Growth Outlook
CAE’s strategic positioning in the civil aviation market remains strong, with the company maintaining its status as the #1 civil aviation training provider globally. The company’s extensive training network includes 70+ locations, 130+ aircraft, and delivers training to more than 150,000 pilots annually.
The growth runway in commercial and business aviation remains substantial, with CAE highlighting industry forecasts that project a need for 1.3 million new aviation personnel by 2032, including 252,000 pilots for commercial aviation and 32,000 for business aviation. This personnel demand is underpinned by projected fleet growth of 39% in commercial aviation and 18% in business aviation from 2023-2032.
The following chart details these growth projections, which represent significant long-term opportunities for CAE’s training business:
In the Defense & Security segment, CAE has established a global footprint with 145+ sites across 40+ countries, employing approximately 6,000 people. The defense market outlook remains positive, with military training spending forecast to grow at a 2.6% CAGR over the next decade, while forecasted deliveries of aircraft and helicopters are expected to grow at a 6.7% CAGR.
Financial Targets & Capital Allocation
CAE outlined its financial outlook for FY25, maintaining its target for three-year EPS growth in the low-to-mid-teens percentage range. The company expects capital expenditures to be approximately $30 million higher than in fiscal 2024 and is targeting a net debt-to-adjusted EBITDA ratio below 3x by the end of FY25.
For the Civil segment, CAE anticipates single-digit growth with segmented operating income modestly below 10% and margins below 22-23%. The Defense & Security segment is expected to deliver revenue growth in the high single-digit percentage range with higher margins than the previous year.
The company’s detailed outlook is presented in the following slide:
CAE’s capital allocation strategy balances revenue and earnings growth, financial strength, and capital returns to shareholders. The company is focused on organic growth through full flight simulator deployments and new training agreements, while simultaneously working to deleverage its balance sheet and maintain an investment-grade profile. The strategy also includes opportunistic share repurchases and evaluating dividend reinstatement.
The return on organic capital deployed in Civil Training has been substantial, with CAE investing over $1,077 million in FY17-FY24 to deploy 114 full flight simulators within its training network:
Forward-Looking Statements & Sustainability
Looking beyond financial performance, CAE has established ambitious sustainability targets, including reducing scope 1 & 2 emissions by 85.7% and scope 3 emissions by 32.5% by FY33. The company is also committed to sourcing 100% of its operations with renewable energy by 2050.
These sustainability initiatives are part of CAE’s broader commitment to advancing aviation safety, inclusion, and industry decarbonization in civil aviation, while supporting preparedness in defense and security:
CAE’s vision statement emphasizes its ambition "to be the worldwide partner of choice in civil aviation and defense and security, by revolutionizing our customers’ training and critical operations with digitally immersive solutions to elevate safety, efficiency and readiness." With record backlogs across both business segments and favorable industry tailwinds, the company appears well-positioned to execute on this vision while delivering on its financial targets for FY25 and beyond.
The strong backlog growth, particularly the doubling of the Defense & Security backlog year-over-year, suggests that CAE’s strategic focus on training and simulation solutions continues to resonate with customers in both civil and military markets, providing a solid foundation for future growth.
Full presentation:
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