Seattle. Toulouse. Montreal.
That was the rather impressive company Canada found itself keeping during the aerospace discussion at the Canada Investment Summit.
Matthew Bromberg, chief executive officer of CAE (TSX: CAE), described Montreal as the world’s “third most significant aerospace hub,” behind Seattle and Toulouse. That becomes particularly interesting when governments around the world are suddenly preparing to spend vastly more on aircraft, defence systems, and the people required to operate them.
Bromberg called what aerospace companies are seeing a “once-in-a-generation increase in defence spending.” That could turn an industry Canada has spent decades building into one of its more valuable competitive advantages.
Source: Getty Images
This time is different
The summit’s “Built to Last: Defence and Advanced Manufacturing in Canada” panel brought together CAE, Bombardier, Telesat, and Linamar.
The discussion wasn’t simply about Canada buying more military equipment. It was about selling Canadian expertise globally. Bromberg pointed out that Canadian aerospace companies already work with manufacturers and governments around the world. Meanwhile, NATO countries are increasing defence budgets, replacing aging equipment and recruiting more personnel.
All those new aircraft, pilots, and crews need something before they’re terribly useful: training. That’s especially important as modern defence becomes more complicated. Aircraft increasingly need to operate alongside satellites, drones, ships and digital systems.
Bromberg argued Canada already possesses the technology and expertise to connect those pieces.
“Trust and technology are what Canada brings to the future of defence,” he said.
For investors, that makes one Canadian company particularly difficult to ignore.
Why I’d buy CAE
CAE builds flight simulators and provides training for commercial aviation and defence customers around the world. That gives it an unusually attractive position in this investment cycle. Bombardier may sell an aircraft once. CAE can potentially train the pilots and crews operating aircraft for decades.
The company already has relationships with defence organizations across numerous allied countries, and management has been expanding partnerships with manufacturers including Saab and Leonardo.
Recent results suggest defence is becoming a stronger part of the business. First-quarter fiscal 2027 defence revenue rose 8.3% year over year to $531.8 million, while adjusted defence operating income increased 9.1% to $50.5 million. Even better, CAE’s defence backlog sits around $10.7 billion. That’s a rather large pile of future work before the next wave of global defence spending fully arrives.
Not standing still
CAE isn’t solely a defence company, however. Its civil aviation business trains commercial and business-jet pilots, giving investors exposure to long-term aviation demand as well.
Total first-quarter revenue increased 6.8% to $1.2 billion, while CAE generated $104 million in free cash flow. Net debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) has also fallen to 2.3 times, giving the balance sheet more breathing room.
Management expects defence revenue to grow at a mid-single-digit rate this fiscal year while continuing to improve margins. That’s exactly the combination I’d want. An existing profitable business with an unusually large structural catalyst developing behind it.
Considerations
CAE shares recently traded around $33.64, roughly 29% below their 52-week high near $47.65. The stock trades around 26 times forward earnings, so this isn’t bargain-bin territory. Investors are still paying for future growth.
There are also risks. Government defence procurement can move painfully slowly, while CAE’s civil business remains exposed to airline demand and geopolitical disruptions. Management is also restructuring parts of the company, which adds execution risk. Still, the summit changed the way I’d look at CAE.
Bottom line
Canada already has the engineers, aerospace cluster, technology, and international relationships. Now allied governments are preparing to spend far more money on defence while simultaneously needing more people trained to use increasingly complicated equipment.
As Bromberg put it at the summit, “The past is our future.”
For CAE shareholders, that future could come with a considerably larger order book.
