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On Friday, Benchmark analysts maintained their Buy rating on AAR Corporation (NYSE:AIR) with a steady price target of $83.00. Currently trading at $58.70, the stock appears slightly overvalued according to InvestingPro Fair Value analysis. The firm’s analysts highlighted AAR Corporation’s third-quarter adjusted EBITDA, which surpassed expectations due to effective efficiency measures. However, they noted that the company’s revenue fell short of forecasts due to the timing of engine inductions from a specific customer, an issue described as unique rather than indicative of a broader market trend.
AAR Corporation has observed an increase in the availability of whole aircraft assets on the market, which is anticipated to boost the volume of its Used Serviceable Material (USM) trading. With a strong current ratio of 2.68 and robust liquidity position, the company appears well-positioned to capitalize on market opportunities. The company has previously stated that it benefits more from higher volumes of USM through spreads rather than direct pricing gains. CEO John Holmes expressed that demand for AAR’s services remains robust and anticipates continued sales growth, supported by an impressive revenue growth of 18.53% over the last twelve months.
The company is also expecting ongoing margin expansion, driven by growth in new parts distribution, Trax software wins, airframe maintenance, repair, and overhaul (MRO) efficiencies, and product support synergies. Following the quarter, AAR announced several significant deals, including a distribution agreement with Chromalloy for BELAC PW4000 PMA parts, a distribution deal with Unison for the Defense Logistics Agency, and the selection of AAR’s Trax software platform by Cathay Pacific for its maintenance operations.
In addition to these developments, AAR anticipates the closure of its $51 million Landing Gear Overhaul business sale in the fourth fiscal quarter of 2025. This strategic move is expected to further shape the company’s growth trajectory and operational focus.
In other recent news, AAR Corp reported its third-quarter financial results for fiscal year 2025, revealing record sales of $678 million, marking a 20% increase from the previous year. However, the company faced a revenue shortfall, missing the expected $698.97 million. Despite this, AAR Corp achieved an earnings per share of $0.99, slightly surpassing the analyst forecast of $0.98, thanks to strong profit margins. Following these results, Truist Securities adjusted its price target for AAR Corp to $78.00 from $81.00 but maintained a Buy rating, citing confidence in the company’s financial performance despite market uncertainties.
The company continues to see strong demand from both commercial and government sectors, with its adjusted EBITDA rising by 39% to $81.2 million. AAR Corp is also expanding its product distribution and consolidating operations, which are expected to contribute to future growth. Looking ahead, the company anticipates mid-single-digit sales growth for the fourth quarter of fiscal year 2025, with adjusted operating margins expected to range between 9.7% and 9.9%. Truist Securities expects AAR Corp’s revenue to increase at a high single-digit rate in the upcoming quarter, excluding the impact of landing gear sales. The firm also forecasts modest sequential growth in adjusted operating margins, reflecting a conservative approach in light of current market uncertainties.
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