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On Tuesday, JPMorgan reiterated its Overweight rating on StandardAero Inc (NYSE: SARO) with a steady price target of $34.00. The $8.8 billion market cap aerospace company’s performance in its second quarter as a publicly-traded entity surpassed JPMorgan’s profit and loss expectations slightly. The firm noted that StandardAero had a modest advantage in revenue and adjusted EBITDA across each of its business segments, with trailing twelve-month revenue reaching $4.99 billion and EBITDA of $579 million.
The company’s guidance for 2025 was particularly positive, surpassing expectations in terms of revenue and adjusted EBITDA, underpinned by robust demand and consistent profitability. Despite these strong indicators, the analyst pointed out that StandardAero’s cash conversion fell short of JPMorgan’s forecasts. The lower cash conversion is partially attributed to the company’s investments aimed at fuelling future growth. InvestingPro data shows the company maintains a healthy current ratio of 2.11, though it operates with relatively weak gross margins of 14.25%.
The JPMorgan analyst believes that cash conversion will likely be a focal point for investors as they evaluate StandardAero’s financial health and future prospects. The company’s commitment to investing in growth, even as it affects short-term cash flows, signals a strategic approach to long-term value creation.
As StandardAero continues to navigate its early stages in the public market, its ability to maintain strong demand and profitability while managing investments and cash flow will be critical for investor confidence. The company’s performance against these metrics is expected to be closely monitored in the coming quarters.
In other recent news, StandardAero Inc. reported a significant 22% increase in revenue for Q4 2024, reaching $1.4 billion. Despite a negative earnings per share (EPS) of -$0.04, the company’s strategic initiatives and operational improvements were positively received by the market. For the full year 2024, StandardAero’s revenue rose by 15%, totaling $5.192 billion, with an adjusted EBITDA growth of 37% in Q4. The company projects its 2025 revenue to range between $5.8 billion and $5.95 billion, with an expected adjusted EBITDA between $770 million and $790 million. UBS analyst Gavin Parsons (NYSE:PSN) recently raised the price target for StandardAero to $28, maintaining a Neutral rating, citing robust revenue growth and strategic investments in engine markets. StandardAero continues to focus on expanding its LEAP, CFM56, and CF34 platforms, with plans to explore mergers and acquisitions in Component Repair Services. The company has also been successful in securing long-term contracts, providing stability amid potential market changes.
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