CAE's (CAE) organizational and operational changes and demand for business jet training are positive factors, however, there are potential risks from ongoing pilot demand shortages and possible additional cost overruns in the defense sector, analsyts from BofA Securities said in a note Friday.

The analysts said their outlook on the company has significantly improved. When they previously downgraded the company, their concerns were focused on cost overruns in the defense sector and a slowdown in pilot hiring due to aircraft original equipment manufacturer production constraints. The analysts added that CAE has written off about $570 million from its defense business, and pilot hiring in the US has created challenges.

The company, however, has made significant management changes, including transitions in board members, the chief financial officer, and the chief executive officer, as well as appointing a chief operating officer. The company has also reduced its workforce, managed capital expenditures more carefully, and continued to exit problematic defense contracts.

The analysts said CAE's civil aviation business has continued to perform well, despite challenges in pilot hiring for the largest US carriers. Although the company expects some pressure in fiscal Q4, the analysts believe its international exposure, especially in Asia, and strong demand for business jets will help offset these challenges. The analysts also said that while the full impact of tariffs on Canada is still unclear, they believe CAE is relatively protected. About 65% of its revenue comes from locally performed services, and the low import levels of simulator materials should help shield it from tariff pressures.

The analysts said that for fiscal year 2026, they raise their adjusted EPS outlook to CA$1.50 from CA$1.45 and for fiscal year 2027, to CA$1.70 from CA$1.65.

BofA Securities upgraded CAE to neutral from underperform and adjusted its price target to CA$45 from CA$25.

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