Montreal-based CAE Inc. raised its fiscal 2027 earnings and margin targets after Defense and Security adjusted segment operating income rose 43.3% year over year while Civil Aviation’s fell 16.3%, even as quarterly revenue declined.
Revenue was C$1,204.7 million for the three months ended Sept. 30, 2026, down 2.6% year over year. Adjusted earnings per share (EPS) increased to C$0.33 from C$0.28, but reported EPS fell to C$0.18 from C$0.23. Financial figures are in Canadian dollars unless otherwise indicated.
CAE moved its fiscal 2027 adjusted EPS outlook to C$1.28 to C$1.35 from C$1.21 to C$1.28. Its adjusted segment operating income margin range is now 14.9% to 15.4%, compared with 14.6% to 15.1%. The company kept its low-single-digit revenue growth and 85% to 95% cash conversion rate outlooks unchanged. CAE said it expects better margins in both divisions and has greater confidence in executing its plans during the fiscal year’s second half. Lower expected finance expense and a lower effective tax rate also informed the higher EPS range.
The outlook assumes CAE’s measures to manage operational effects linked to the Middle East remain effective, the company said. It identified worsening regional conditions, prolonged fuel-price increases and disruptions to airline activity, customer operations or supply chains as potential pressures on performance.
Defense and Security posted adjusted segment operating income of C$75.4 million, up 43.3%. CAE linked the increase to stronger margins on products recognized at delivery and North American contracts, as well as C$11 million in investment tax credits for prior years that it identified and claimed this quarter. Civil Aviation’s measure fell 16.3% to C$103.9 million as simulator sales contributed less and selling and administrative costs rose. CAE said higher income from business training services partly softened the decline.
Across the company, adjusted segment operating income rose 1.5% to C$179.3 million. Reported operating income fell 26.3% to C$114.4 million, including C$42.6 million in restructuring costs. CAE reported C$175.3 million in cumulative transformation costs through the quarter and expects total costs of C$200 million to C$250 million, with annual run-rate savings of C$125 million to C$150 million.
Free cash flow increased to C$179.9 million from C$109.8 million, mainly as capital expenditures fell to C$48.9 million from C$107.6 million. CAE classifies adjusted EPS, adjusted segment operating income and free cash flow as non-IFRS measures that are not standardized under international accounting rules.
Separately, CAE plans to sell its Flightscape airline operations software business to SITA for an enterprise value of US$500 million. The deal, announced Oct. 26, is expected to close in the first half of 2027, subject to approvals and other closing conditions. CAE said proceeds would support its transformation, investment in core businesses and shareholder returns.
CAE scheduled its earnings call for Thursday, Nov. 12, at 8 a.m. ET.
