Will CAE turn around soon?

Hi Anthony,

I'll also chime in here. CAE is a high-quality company. As Dan pointed out, the longer COVID-19 drags on the worse off they will be, and the longer a rebound will take. That being said, CAE is also not a one trick pony.

The company's Defence & Security segment accounts for 39% of revenue. When it announced the dividend cut, it also alluded to the fact that this unit wasn't as impacted - 90% of the segment's operations remain open as they provided critical services to the the industry. Regardless what happens with COVID-19, this segment will enable them to weather the storm better than other, commercial and private airline pure-plays.

Patience will be key for all aerospace companies, but long-term CAE is well positioned.

Mat

Hey Anthony.

Because CAE provides training and simulation services to airline companies, we expect them to struggle along with airlines. It has suspended its dividend along with laying off over a quarter of its workforce. The dividend cut and layoffs hurt, but it is also a sign the company is taking steps in advance to protect its financial position and ultimately shareholders.

Now, with that being said, we don't think it will struggle as bad as the airlines, considering that even during this downturn pilots will be required to complete courses to keep their licenses. However there is no doubt it will struggle as this is a global company, and COVID is a global crisis.

It is difficult to say about adding at these levels. We rely strictly on fundamentals, and it really won't be clear to us how badly companies like CAE and Air Canada are effected until we see Q1 and Q2 numbers.

There is no doubt that the COVID crisis is temporary. We just don't know how long yet. If it resolved itself quickly and people got back to flying, you'd see a very quick recovery back to the norm for stocks like CAE and Air Canada. However, the longer this drags out and the longer COVID fears and travel restrictions stick around, the harder hit these companies will be.