Stock of the Day

October 2, 2019

AAR (AIR)

$97.95
+$0.89 (+0.9%)
Market Cap: $3.90B

About AAR

AAR Corp. provides products and services to commercial aviation, government, and defense markets worldwide. The Parts Supply segment leases and sells aircraft components and replacement parts. The Repair & Engineering segment provides airframe maintenance services, such as airframe inspection, painting, line maintenance, airframe modification, structural repair, avionics service and installation, exterior and interior refurbishment, and engineering and support services; component repair services comprising maintenance, repair, and overhaul (MRO) services, engine and airframe accessories, and interior refurbishment; and landing gear overhaul services, including repair services on wheels and brakes. This segment also develops specific aircraft components and parts; and designs proprietary designated engineering representative repairs. The Integrated Solutions segment engages in the fleet management and operation of customer-owned aircraft; provision of supply chain logistics services, such as material planning, sourcing, logistics, information and program management, and parts and component repair and overhaul services; and flight hour component inventory and repair services. In addition, the segment provides integrated software solutions comprising Trax, a cloud-based electronic enterprise resource platform, as well as a suite of paperless mobility apps for automating MRO workflows. The Expeditionary Services segment designs, manufactures, and repairs transportation pallets; and containers and shelters for military and humanitarian tactical deployment activities, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters, as well as engages in provision of engineering, design, and system integration services for specialized command and control systems. AAR Corp. was founded in 1951 and is headquartered in Wood Dale, Illinois.

Today's Trend

AAR Corp. (NYSE: AIR) shares have recently decreased despite strong fiscal 2027 first-quarter results, as investors weigh the company’s planned acquisition of MRO Holdings against its growth prospects.

  • AAR reported first-quarter revenue of $918 million, up 24% year over year and above the $878.8 million consensus estimate. Adjusted diluted EPS of $1.49 also exceeded expectations of $1.30, while adjusted EBITDA increased 34%. AAR Reports First-Quarter Results
  • Management issued second-quarter revenue guidance of $906.6 million to $922.5 million, above the approximately $893.5 million analyst consensus, reflecting continued strength in commercial aftermarket demand. AAR MRO Holdings Announcement
  • Jefferies raised its price target for AAR to $160, while management said the MRO Holdings transaction could lift adjusted EBITDA margins to 19%–20% over three to four years through higher-margin operations and expected cost synergies. Jefferies Raises AAR Price Target
  • AAR’s earnings call focused on integration plans, MRO Holdings’ margin profile, financing, leverage reduction and the effect of legacy programs on profitability. These factors are likely to determine whether the acquisition creates value.
  • The planned purchase of a 65% controlling interest in MRO Holdings carries an implied enterprise value of roughly $4 billion. Funding includes new debt and approximately $1 billion of equity issuance, increasing dilution and pushing expected net leverage to about 3.6 times at closing. Investors appear concerned about balance-sheet risk and integration execution. AAR Margin Targets and MRO Holdings Deal
  • Zacks Research downgraded AAR from “strong buy” to “hold,” and commentary has characterized the stock as richly valued after the deal announcement, adding pressure to sentiment despite the earnings beat.
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