12:51 PM EDT, 05/30/2024 (MT Newswires) -- The Government of Canada has selected SkyAlyne, a partnership between CAE and KF Aerospace, as the recipient for the Future Aircrew Training (FAcT) Program contract, which will train the Royal Canadian Air Force (RCAF) for the next 25 years.

This development is a positive, in RBC's view.

"We spoke with management following the announcement and flag the $11.2 billion contract ($450 million/year) compares to F24 Defense revenue at CAE of $1.8 billion," analyst James McGarragle writes. CAE is already executing on the current contract and is only a partner in the SkyAlyne, so the step-up in revenue is expected to be less material. However, RBC notes the incremental revenue to come with >10% EBIT margin, therefore representing "nice upside" to F2026 Defense operating income estimates.

RBC will look to management for more specifics surrounding the contract as further details emerge.

CAE is rated Outperform, with a $31 target.

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