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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's Strong Q2 FY2026 Earnings Driven by Strategic Acquisitions and Organic Growth

AAR Corp reported a robust second-quarter fiscal year 2026 earnings, with total sales growth of 16% year over year to $795 million, driven primarily by a 29% growth in the parts supply segment. Adjusted EBITDA increased 23% to $96.5 million, and adjusted diluted EPS rose 31% to $1.18, surpassing analyst estimates of $1.02. The company's net debt leverage decreased to 2.49 times, within its target range of 2.0-2.5 times.

Publication Date: Jan -08

📋 Highlights
  • Total Sales Growth:: 16% YoY to $795 million, driven by 29% growth in the parts supply segment.
  • Strategic Acquisitions:: Completed ADI ($108M) and HAYCO Americas ($77M), with Aircraft Reconfig Technologies ($35M) pending Q4 closure.
  • Adjusted EBITDA & EPS:: EBITDA up 23% to $96.5 million; adjusted diluted EPS rose 31% to $1.18.
  • Future Sales Guidance:: Q3 growth of 20-22% and full-year growth of 17%, with organic growth of 11% annually.
  • Net Debt Leverage:: Reduced to 2.49x, within the target range of 2.0-2.5x, reflecting disciplined capital management.

Strategic Acquisitions and Growth Initiatives

The company completed two strategic acquisitions during the quarter: ADI, a leading distributor of electronic components and assemblies, for $108 million, and HAYCO Americas, extending its leadership position in airframe heavy maintenance, for $77 million. A third acquisition, Aircraft Reconfig Technologies, is expected to close in the fourth quarter for $35 million. These acquisitions are expected to drive growth and expand the company's capabilities in the aircraft maintenance and repair market.

Segment Performance and Outlook

The parts distribution segment saw significant growth, with sales up 32% organically, driven by both commercial and defense customers. The heavy maintenance business has made significant margin gains since coming out of COVID and is now a low double-digit margin business with potential to expand. The company expects to punch above the 10% adjusted operating margin level over time, with the HAYCO integration being a near-term dilution area.

Valuation and Growth Expectations

With a P/E Ratio of 35.72 and an EV/EBITDA of 27.11, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 10.7%. The company's ROIC of 7.45% and ROE of 7.23% indicate a decent return on capital, but the Net Debt / EBITDA ratio of 6.12 suggests a relatively high leverage. As the company continues to execute on its growth strategy, investors will be watching to see if AAR Corp can meet or exceed these expectations.

Margin Expansion and Integration

John Holmes, the company's management, noted that the current quarter is a low point due to the HAYCO acquisition, but margins will expand to low double-digit and exceed previous levels. The component repair business has mid to high teens operating margins, and the company plans to drive more volume to it. For HAYCO, margin improvement will come from a mix of contract realignment and cost rationalization, with significant revenue reductions to establish efficient processes.

3. NewsRoom

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AAR signs new agreement with Otto Instrument Service

Feb -26

Source: prnewswire.com

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AAR Corp. vs. TAT Technologies: Which Stock to Buy in 2026?

Feb -26

Source: zacks.com

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EXPEDIA 2026 AIR HACKS: FRIDAY TAKES OFF AS THE NEW CHEAPEST DAY TO DEPART AND BOOK

Feb -17

Source: businesswire.com

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AAR appoints Dylan Wolin as Chief Financial Officer

Feb -11

Source: prnewswire.com

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AIR Outperforms Industry in the Past Year: How to Play the Stock?

Feb -11

Source:

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Thrivent Financial for Lutherans Reduces Stock Position in AAR Corp. $AIR

Feb -08

Source: defenseworld.net

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Sarah Louise Flanagan Sells 10,750 Shares of AAR (NYSE:AIR) Stock

Feb -06

Source: defenseworld.net

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Are Aerospace Stocks Lagging AAR (AIR) This Year?

Feb -03

Source: zacks.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

118.61$

Current Price

118.61$

Potential

-0.00%

Expected Cash-Flows