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CAE expected to propser from aerospace recovery

April 14, 2010, Montreal - Aerospace companies such as CAE Inc. should prosper and see their share prices increase as the commercial airplane rebound gains strength, says an industry analyst.


April 14, 2010
By The Canadian Press

Cameron Doerksen of Versant Partners raised his target price for the Montreal-based flight simulator and training company Wednesday to $12.50 from $10.

"We believe the market will be willing to pay a premium multiple for stocks such as CAE that are positioned to benefit from the aerospace up-cycle,'' he wrote in a report.

Even though the stock has performed well over the last 12 months, he said there remains "material upside potential'' especially for medium to longer term investors.

Announced production rate increases by Airbus and Boeing, along with strengthening airline traffic are signals that the commercial aerospace industry rebound is accelerating, Doerksen added.

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Canadian companies such as landing gear maker Heroux-Devtek and Magellan Aerospace Corp. also have strong relationships with the world's two largest aircraft manufacturers.

A rebound in airline traffic should help them and Bombardier Inc. as carriers look to renew their fleets by purchasing regional jets or the new CSeries.

Unlike its larger rivals, the Montreal-based aircraft manufacturer is planning to further curtail production of its regional planes because of soft demand.

Bombardier also faces ongoing challenges to the key business jet sector. The market has stabilized as utilization is improving and the outlook for new orders is slowing improving.