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Earnings Beat: CAE Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St

It's been a good week for CAE Inc. (TSE:CAE) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.3% to CA$41.32. CAE missed revenue estimates by 2.3%, with sales of CA$924m, although statutory earnings per share (EPS) of CA$0.37 beat expectations, coming in 6.9% ahead of analyst estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for CAE

TSX:CAE Past and Future Earnings, February 11th 2020

Taking into account the latest results, the latest consensus from CAE's nine analysts is for revenues of CA$4.05b in 2021, which would reflect a decent 11% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to swell 18% to CA$1.58. Before this earnings report, analysts had been forecasting revenues of CA$4.05b and earnings per share (EPS) of CA$1.57 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 8.5% to CA$42.33. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values CAE at CA$45.00 per share, while the most bearish prices it at CA$39.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the CAE's past performance and to peers in the same market. We can infer from the latest estimates that analysts are expecting a continuation of CAE's historical trends, as next year's forecast 11% revenue growth is roughly in line with 9.4% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 6.5% next year. So it's pretty clear that CAE is forecast to grow substantially faster than its market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple CAE analysts - going out to 2024, and you can see them free on our platform here.

You can also view our analysis of CAE's balance sheet, and whether we think CAE is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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