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1. Company Snapshot

1.a. Company Description

AAR Corp.provides products and services to commercial aviation, government, and defense markets worldwide.The Aviation Services segment offers aftermarket support and services; inventory management and distribution services; and maintenance, repair, and overhaul, as well as engineering services.


This segment also sells and leases new, overhauled, and repaired engine and airframe parts, and components; and provides inventory and repair programs, warranty claim management, and outsourcing programs for engine and airframe parts and components, as well as performance-based supply chain logistics programs in support of the U.S. department of defense and foreign governments.In addition, it offers airframe inspection, maintenance, repair and overhaul, painting, line maintenance, airframe modification, structural repair, avionic and installation, exterior and interior refurbishment, and engineering and support services; and repairs and overhauls components, landing gears, wheels, and brakes.The Expeditionary Services segment provides products and services supporting the movement of equipment and personnel by the U.S. and foreign governments, and non-governmental organizations.


This segment also designs, manufactures, and repairs transportation pallets, and various containers and shelters; and provides engineering, design, and system integration services for command and control systems.The company serves domestic and foreign passenger airlines; domestic and foreign cargo airlines; regional and commuter airlines; business and general aviation operators; original equipment manufacturers; aircraft leasing companies; aftermarket aviation support companies; and domestic and foreign military customers.It primarily markets and sells products and services through its employees and foreign sales representatives.


AAR Corp.was founded in 1951 and is headquartered in Wood Dale, Illinois.

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1.b. Last Insights on AIR

AAR Corp.'s recent performance was negatively impacted by the decline in Airbus stock price, which has crashed from €177.20 in March to €140 due to Donald Trump's tariffs and potential supply chain issues. This development has likely affected AAR's sales and revenue, as the company is a major supplier to Airbus. Additionally, the company's Q3 earnings, although surpassing estimates, missed the Zacks Consensus Estimate by 3%, indicating some weakness in the business.

1.c. Company Highlights

2. AAR Corp. Accelerates Growth with Strong Q3 Momentum

In Q3, AAR Corp. posted a 25% jump in total sales to $845 million, 31% rise in adjusted operating income, and 26% increase in adjusted EBITDA to $102.1 million, pushing the adjusted EBITDA margin to 12.1%. Adjusted EPS climbed to $1.25, topping the consensus estimate of $1.21. The company’s robust performance is underpinned by a 14% organic sales lift, with the new parts distribution arm driving 36% growth.

Publication Date: Apr -18

📋 Highlights
  • Total Sales & Profit Growth:: 25% total sales growth, 31% adjusted operating income increase, and 26% rise in adjusted EBITDA and EPS.
  • Organic Growth in Parts Distribution:: 36% organic growth in new parts distribution, with 14% overall organic sales to $845 million.
  • Defense Distribution Outperformance:: 55% organic growth in Defense distribution, driven by strong government demand and higher-margin work.
  • HAECO Integration Progress:: Repair & Engineering integration ahead of schedule, with hanger expansions on track and Trax scaling to 6,000 users by 2027.
  • Q4 Guidance Improved:: Organic adjusted sales growth of 6-8% in Q4, with adjusted EBITDA margin rising to 12.1% from 12.0% YoY.

Revenue & Margin Expansion

The 25% year‑over‑year sales surge reflects both volume gains and a modest pricing lift. Adjusted EBITDA margin improvement to 12.1% from 12.0% indicates disciplined cost management, while the 26% rise in adjusted EBITDA aligns with the company's strategic focus on high‑margin repair and engineering services.

Organic Sales Growth Drivers

John Holmes highlighted that 2/3 of the 36% organic growth in new parts distribution came from same‑store sales, with the remaining 1/3 attributed to new contract wins and price adjustments. Defense distribution, in particular, delivered a 55% organic increase, reinforcing the company’s high‑margin government exposure.

Defense and Commercial Segments

The defense business outperformed expectations, with a 55% organic uptick, while the commercial aftermarket remained longer‑cycle, driven by heavy maintenance backlog. Trax’s strong quarter for sales and margin growth further diversified the commercial portfolio and positioned the company for future upside.

Repair & Engineering Integration

The HAECO Americas integration is ahead of schedule, with right‑sizing and workforce optimization underway. New systems implementation is progressing, and the company is on track to close non‑profitable aircraft, enhancing profitability and operational efficiency across the repair and engineering segment.

Trax Integrated Solutions Outlook

Trax’s partnership with Delta has deployed to 2,000 users, with an expected 6,000 in the coming months. The company projects linear recurring revenue growth, targeting a doubling of the business from $50 million to $100 million over the next few years, supported by a planned parts marketplace launch.

Cash Flow and Working Capital

AAR Corp. expects to be cash‑flow positive in Q4 and for the full year, driven by on‑time customer payments and improved working capital. The company’s disciplined approach to inventory and receivables management has contributed to stronger free cash flow generation.

Guidance and Market Outlook

For the remainder of the fiscal year, adjusted sales growth is projected at 19%‑21%, with Q4 organic growth forecast at 6%‑8%. The guidance reflects improved market strength and a deceleration relative to last year, yet remains above the prior quarter’s implied outlook.

Valuation Snapshot

At a P/E of 27.2 and EV/EBITDA of 17.51, AAR Corp.’s valuation reflects its high growth trajectory and robust margin profile. The company’s ROIC of 7.32% and ROE of 12.07% indicate solid return generation on invested capital.

3. NewsRoom

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AAR completes acquisition of Aircraft Reconfig Technologies

Apr -24

Source: prnewswire.com

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AIR and Cantor Equity Partners III Announce Effectiveness of F-4 Registration Statement Ahead of Planned Merger and Nasdaq Listing

Apr -23

Source: businesswire.com

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AAR and Woodward sign multi-year commercial distribution agreement

Apr -22

Source: prnewswire.com

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AAR launches Airvoyant℠, an AI-driven procurement platform for airlines and MROs

Apr -21

Source: prnewswire.com

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AAR (NYSE:AIR) Sets New 1-Year High – Should You Buy?

Apr -15

Source: defenseworld.net

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AAR awarded $305 million follow-on C-40A contract for U.S. Navy and Marine Corps

Apr -14

Source: prnewswire.com

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BROAD ARROW BRINGS EXCLUSIVE MODERN PORSCHE AND RUF MARVELS TO ANNUAL AUCTION AT AIR|WATER

Apr -07

Source: globenewswire.com

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AAR to host 2026 Investor Day

Apr -06

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

Aviation Services

Expected Growth: 1.0%

AAR Corp's Aviation Services segment growth is driven by increasing demand for aircraft maintenance, repair, and overhaul (MRO) services, expansion of commercial aviation fleets, and rising adoption of predictive maintenance technologies. Additionally, the company's strategic partnerships and investments in digital platforms enhance its competitiveness and support growth.

Expeditionary Services

Expected Growth: 1.0%

AAR Corp's Expeditionary Services segment growth is driven by increasing demand for mobility and logistics support from government agencies and defense contractors. The company's expertise in providing rapid response and customized solutions for remote and hostile environments has positioned it for growth. Additionally, the rising need for humanitarian and disaster relief efforts has contributed to the segment's 1.0 growth rate.

7. Detailed Products

Aviation Services

AAR Corp provides aviation services including aircraft maintenance, repair, and overhaul (MRO) services, as well as supply chain management and logistics support.

Expeditionary Services

AAR Corp offers expeditionary services including airlift support, cargo transportation, and logistics services to support military and humanitarian operations.

Mobility Products

AAR Corp designs and manufactures mobility products including pallets, containers, and shelters for military and commercial customers.

Composites

AAR Corp manufactures composite components for aerospace and defense applications, including aircraft structures and satellite components.

Government Services

AAR Corp provides government services including program management, engineering, and logistics support to government agencies.

8. AAR Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

AAR Corp. operates in the aerospace and defense industry, which has a moderate threat of substitutes. While there are some substitutes available, they are not easily accessible, and the company's products and services are highly specialized.

Bargaining Power Of Customers

AAR Corp.'s customers are primarily governments and large corporations, which have limited bargaining power due to the specialized nature of the company's products and services.

Bargaining Power Of Suppliers

AAR Corp. has a moderate bargaining power of suppliers, as it relies on a diverse range of suppliers for its operations. While some suppliers may have significant bargaining power, the company's diversified supply chain mitigates this risk.

Threat Of New Entrants

The aerospace and defense industry has significant barriers to entry, including high capital requirements, specialized expertise, and regulatory hurdles, making it difficult for new entrants to enter the market.

Intensity Of Rivalry

The aerospace and defense industry is highly competitive, with several established players competing for market share. AAR Corp. faces intense competition from companies such as Boeing, Lockheed Martin, and Northrop Grumman.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 21.34%
Debt Cost 4.76%
Equity Weight 78.66%
Equity Cost 11.99%
WACC 10.45%
Leverage 27.13%

11. Quality Control: AAR Corp. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Woodward

A-Score: 5.1/10

Value: 0.9

Growth: 6.9

Quality: 6.6

Yield: 0.0

Momentum: 9.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Spirit AeroSystems

A-Score: 5.0/10

Value: 9.6

Growth: 1.1

Quality: 5.2

Yield: 0.0

Momentum: 7.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
BWXT

A-Score: 4.9/10

Value: 0.9

Growth: 6.3

Quality: 5.4

Yield: 2.0

Momentum: 9.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
AAR

A-Score: 4.2/10

Value: 4.8

Growth: 4.8

Quality: 3.1

Yield: 0.0

Momentum: 7.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Leonardo DRS

A-Score: 4.1/10

Value: 2.3

Growth: 3.7

Quality: 6.2

Yield: 1.0

Momentum: 5.5

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Axon Enterprise

A-Score: 3.8/10

Value: 0.0

Growth: 9.6

Quality: 5.2

Yield: 0.0

Momentum: 4.0

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

110.63$

Current Price

110.63$

Potential

-0.00%

Expected Cash-Flows