Is CAE Inc. (CAE) Among the Best Mid Cap Defense Stocks to Buy According to Analysts?

We recently published a list of the 10 Best Mid Cap Defense Stocks to Buy According to Analysts. In this article, we will take a look at where CAE Inc. (NYSE:CAE) stands against other best mid cap defense stocks.

Defense stocks have surged over the past week after President Trump unveiled plans for a $1 trillion defense budget for fiscal 2026, representing a 12% increase from the current year. Here is what he told reporters on April 7:

“Nobody’s seen anything like it. We have to build our military and we’re very cost-conscious, but the military is something that we have to build. And we have to be strong because you’ve got a lot of bad forces out there now. So we’re going to be approving a budget and I’m proud to say actually, the biggest one we’ve ever done for the military.”

READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.

This is an encouraging development for America’s defense sector, which had a subdued start to the year due to uncertainty around budget cuts. The creation of DOGE had also reshaped investors’ views of the industry.

Stocks got another boost last week after market chatter that tariff negotiations to address trade imbalances could include commitments from foreign countries to buy weapons from the US. On April 7, Vietnam’s prime minister issued a statement, asking for a 45-day delay in the imposition of tariffs and stating his country would buy more American goods, including arms, to tackle the trade gap.

Defense stocks have soared in Europe this year, as regional capitals unlocked billions to supercharge their militaries. While a steep selloff in response to the tariffs sparked a major plunge in shares last week, this has been a year to remember for several European defense companies that have seen double-digit returns so far in 2025.

Analysts at Citi believe defense stocks are poised for outperformance due to minimal tariff exposure, increased military budgets, and rising geopolitical tensions. Jason Gursky stated the following in a detailed preview to clients on April 10:

“We materially change the rank order of our stock picks, moving our defense coverage to the top of the list given our positive view on the outlook for global defense spending.”

Investors are also buoyed by the unveiling of a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. President Trump has also announced that he will resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.

Methodology

For this article, we sifted through screeners to identify mid-cap stocks in the aerospace and defense industry. These stocks have a market cap between $2 billion and $10 billion. From there, we picked the top 10 defense stocks with the highest positive share price upside potential. All data is as of the close of business on Friday, April 11, 2025.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

CAE Inc. (NYSE:CAE)

Market Cap: $7.27 billion

Share Price Upside Potential: 40.85%

CAE Inc. (NYSE:CAE) is a technology company specializing in simulation training and critical operations support solutions. It operates in two segments: Civil Aviation and Defense and Security.

On February 13, the company reported impressive results for the third quarter of fiscal 2025, with consolidated revenue growing 12% year-over-year to $1.22 billion. Adjusted segment operating income was posted at $190 million, up 31% from the prior year. Adjusted EPS was logged at $0.29, compared to $0.24 per share for Q3 2024. The company’s backlog stood at $20.3 billion, which included $2.2 billion in new orders.

The strong financial results have bolstered investor sentiment around the stock. ClearBridge Mid Cap Strategy stated the following regarding CAE Inc. (NYSE:CAE) in its Q4 2024 investor letter:

“We also benefited from our strong stock selection in the industrials sector. CAE Inc. (NYSE:CAE), which provides simulation training and critical operations support to both civil and defense aviation customers, reported solid quarterly earnings stemming from its defense business. In addition to the company’s strong market share and customer demand in civil flight simulation, its strong growth in its defense business and active approach to improving its balance sheet should be long-term growth catalyst.”

Late last month, CAE Inc. (NYSE:CAE) was awarded two notable contracts. First, it clinched an agreement to provide management, engineering, and maintenance services to support the C-130J Weapon Systems Trainer for the Royal New Zealand Air Force. Second, it won a $180 million contract to support the US Army under the Advanced Helicopter Flight Training Support (AHFTS) program.

Overall, CAE ranks 1st among the 10 best mid cap defense stocks to buy according to analysts. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CAE but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.