Investing.com -- RBC (TSX:RY) Capital Markets downgraded  CAE  (NYSE:CAE)  Inc. (TSX:CAE) to Sector Perform from Outperform following fourth-quarter earnings that met expectations but left limited room for upside. Analyst James McGarragle cited a “full valuation” and a lack of near-term catalysts as the primary reasons for the downgrade.

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“CAE shares are the most expensive in our coverage group,” McGarragle wrote, noting the company trades at 27x FY2026 consensus EPS, well above peers in aerospace, transportation, and diversified industrials. Despite healthy long-term trends in pilot training and defense spending, the firm views current valuations as already pricing in those positives.

CAE reported adjusted EPS of $0.47 in fiscal Q4, slightly ahead of consensus and RBC’s own forecast on the back of favorable R&D credit timing. The Civil segment came in mixed, with adjusted operating income below RBC estimates, while the Defense segment exceeded forecasts thanks to margin improvements and stronger-than-expected revenue.

RBC lowered its price target to $38 from $41, reflecting reduced EBITDA projections and a slightly lower blended valuation multiple of 11.4x. “We anticipate that CAE’s valuation will be supported by favourable industry fundamentals, however see a lack of meaningful near-term catalysts,” McGarragle wrote.

Investor focus is shifting to the pace of Civil revenue recovery, constrained by airline pilot hiring delays and ongoing supply issues from aircraft OEMs. On the upside, McGarragle acknowledged that “pilot training could rebound ahead of expectations” and Defense segment margins may outperform guidance.

While RBC still sees CAE benefiting from secular tailwinds, including increased NATO defense spending and favorable pilot demographics, the near-term balance of risk and reward appears neutral. “We view risk-reward as well-balanced,” McGarragle wrote, assigning a Sector Perform rating based on implied returns to the new price target.

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