Aerospace Ambitions: Flying High with Canadian Aviation Stocks

little girl in pilot costume playing and dreaming of flying over the sky

A dynamic industry in Canada with a very bright future is aerospace. The global pandemic stalled momentum in 2020, but a complete recovery is underway. In 2022, aerospace remained number one in the R&D ranking among all Canadian manufacturing industries.  

Three companies with lofty aerospace ambitions are flying high in 2023. MDA Ltd. (TSX:MDA), CAE Inc. (TSX:CAE), and Héroux-Devtek Inc. (TSX:HRX) are excellent options in this high-growth sector. The aviation stocks could benefit from the steady growth of the aerospace market and deliver substantial returns on investment.

Significant growth pipeline

Brampton-based MDA develops and manufactures advanced space technologies that help drive the growing space economy. This $1.3 billion company is the pioneer in geo-intelligence, engages in robotics and space operations, and provides satellite systems.

As of this writing, MDA outperforms the broader market by a mile. At $10.73 per share, the year-to-date gain is 67.7%. Its CEO, Mike Greenley, said, “With healthy demand trends across our end markets, we are seeing our opportunity funnel expand, boding well for MDA and our future growth.”

In the first half of 2023, revenue increased 40.6% year over year to $397.9 million, while net income reached $26 million compared to the $400,000 net loss in the same period in 2022. The backlog is down to $1 billion as MDA continues to convert its backlog to revenue.

Management expects to end 2023 with robust revenue between $785 and $810 million, representing 22% to 26% year-over-year growth. Greenley adds that MDA has a significant growth pipeline and is well-positioned to capitalize on strong customer demand and vigorous market activity.

Global market and technology leadership     

CAE is known for its simulation and modelling technologies. The $10.6 billion company from Saint-Laurent also is a provider of training services to airlines, aircraft manufacturers, healthcare specialists, and defence customers. If you invest today, the share price is $33.22 per share (+26.8% year to date).

In Q1 fiscal 2024 (three months that ended June 30, 2023), revenue increased 13% to $1.1 billion versus Q1 fiscal 2023. Operating and net income soared respectively 230% and 3,741% year over year to $130.1 million and $65.3 million.

Its President and CEO, Marc Parent, said CAE is off to a solid start to fiscal 2024 and notes the secular tailwinds in all business segments (civil aviation, defence and security, and healthcare). CAE will harness its global market and technology leadership to ensure growth.

Surging demand

Héroux-Devtek is a prominent supplier of landing gear solutions for the commercial and defence sectors of the aerospace market. The $547.5 million firm designs, develops, manufactures, repairs, and overhauls landing gear, actuation systems and components. It’s also the world’s third-largest landing gear company.

In Q1 fiscal 2024, sales and net income climbed 23.3% and 311% year over year respectively to $140.7 million and $4 million. Héroux-Devtek’s President and CEO, Martine Brassard, expects the financial results and market share to further improve and expand due to the healthy order book and substantial surge in demand.

As of this writing, the stock is winning and up 22.5% year to date ($16.10 per share).

Enormous growth potential

Market experts see Canada’s aerospace sector as a hotbed of innovation and the next area of opportunity. With the technological advancements, the growth potential of aerospace companies is enormous.

The post Aerospace Ambitions: Flying High with Canadian Aviation Stocks appeared first on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.