By Adriano Marchese

CAE shares fell after the company issued a cautious outlook for fiscal 2027, flagging weaker civil-aviation demand as disruptions in the Middle East offset strength in its burgeoning defense business.

Shares in late morning trading were down 12% at 32.49 Canadian dollars ($23.58).

The Montreal-based company, which provides flight-simulation equipment and pilot-training services to airlines, defense forces and business aviation operators, said late Thursday that it expects low-single-digit revenue growth in the year ahead as pressures mount across key parts of its business.

CAE's civil-aviation revenue is expected to be flat to slightly lower, with profitability temporarily depressed by softer demand for training and products, as well as network optimization efforts that are placing short-term cost inefficiencies.

Part of the problem for civil aviation is also geopolitical tensions in the Middle East. The U.S. and Israel's war on Iran, which began in late February and three months later is in a fragile state of cease-fire, has been weighing on operations and customer activity in the region and CAE said these could add further pressure if conditions worsen.

At the same time, CAE is undergoing a multiyear overhaul aimed at reshaping the company for higher returns, better efficiency and a more focused portfolio. While CAE didn't quantify the upfront cost of the restructuring, the company said fiscal 2027 results will be weighed down by transformation-related expenses, temporary cost inefficiencies and elevated investments.

The company expects these changes to generate C$125 million to C$150 million in run-rate savings by fiscal 2030 as well as C$950 million to C$1 billion of adjusted segment operating income.

With these in mind, management expects its adjusted segment operating income margin on a consolidated basis for the fiscal year through March 31, 2027, to be 14.6% to 15.1%.

Adjusted earnings are expected to be between C$1.21 and C$1.28 a share. Analysts expected C$1.24 a share.

In the fourth fiscal quarter ended March 31, CAE's revenue rose 4% to C$1.33 billion, topping forecasts of C$1.29 billion. The civil segment, its largest, saw revenue rise 3%, while defense rose 6% from a year earlier.

Net income fell to C$73.1 million from C$135.9 million, a decline to C$0.23 from C$0.42 on a per-share basis.

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

May 22, 2026 11:56 ET (15:56 GMT)

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