Core Viewpoint - Institutional Shareholder Services (ISS) has recommended that Air Products shareholders vote for the election of Mantle Ridge nominees and against the company’s current nominees, highlighting the need for a reconstituted board to address succession planning and strategic oversight issues [1][2][3]. Group 1: Board Composition and Recommendations - ISS recommends shareholders vote "FOR" Mantle Ridge nominees Andrew Evans, Paul Hilal, and Dennis Reilley, and states that Tracy McKibben is well qualified to serve on the board [1][2]. - ISS advises shareholders to vote "WITHHOLD" on company nominees Seifi Ghasemi, Charles Cogut, and Edward L. Monser, emphasizing the need for change in board leadership [1][3]. - Mantle Ridge believes that a refreshed board with its nominees would be better positioned to lead a credible CEO succession process and create long-term value for shareholders [1][2]. Group 2: Performance and Strategic Concerns - Air Products has experienced material underperformance over the last five years, with a decline in return on capital and total shareholder return (TSR) significantly lagging behind peers and the broader market [3][5]. - The company's capital deployment strategy, which includes investments in coal gasification and clean hydrogen projects, has introduced risks that have negatively impacted investor sentiment and financial performance [3][5]. - ISS noted that the current board's oversight of strategy and succession planning has been inadequate, leading to a lack of a credible succession plan for the CEO position [4][5]. Group 3: CEO Succession and Governance Issues - The current board has ceded control of the CEO succession process to Ghasemi, resulting in a lack of transparency and credibility regarding succession planning [5][11]. - The board's independent members have not effectively managed the succession process, raising concerns about their ability to oversee Ghasemi's potential successor [5][11]. - Mantle Ridge argues that the removal of Ghasemi from the board would facilitate a fresh assessment of leadership and improve the timing for a CEO transition [5][11].

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to complement the Zacks Rank, providing additional metrics for stock selection [2] Zacks Style Scores Overview - Stocks are rated A, B, C, D, or F based on value, growth, and momentum characteristics, with higher scores indicating better chances of outperforming the market [3] - The Style Scores are categorized into four types: Value Score, Growth Score, Momentum Score, and VGM Score [3][4][5][6] Value Score - Focuses on identifying undervalued stocks using ratios like P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - Analyzes projected and historical earnings, sales, and cash flow to identify stocks with sustainable growth potential [4] Momentum Score - Utilizes price trends and earnings estimate changes to identify favorable times for investing in high-momentum stocks [5] VGM Score - Combines the three Style Scores to highlight stocks with attractive value, strong growth forecasts, and promising momentum [6] Zacks Rank Integration - The Zacks Rank leverages earnings estimate revisions to guide investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have historically produced an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [8] Stock to Watch: AAR Corp. - AAR Corp. operates in the aviation and defense industries, serving major clients like Boeing and Airbus, and has a global presence in over 20 countries [11] - Currently rated 2 (Buy) with a VGM Score of A, AAR Corp. is projected to achieve year-over-year earnings growth of 12.6% for the current fiscal year [12] - The company has seen positive earnings estimate revisions and an average earnings surprise of 3.9%, making it a strong candidate for growth investors [12][13]

Group 1 - AAR (AIR) has shown strong year-to-date performance, returning approximately 9.5%, significantly outperforming the average return of 1% for the Aerospace sector [4] - The Zacks Rank for AAR is 2 (Buy), indicating a favorable outlook based on earnings estimate revisions and improving earnings outlooks [3] - Over the past 90 days, the Zacks Consensus Estimate for AAR's full-year earnings has increased by 3.2%, reflecting improved analyst sentiment [4] Group 2 - AAR is part of the Aerospace - Defense Equipment industry, which consists of 26 individual stocks and currently ranks 36 in the Zacks Industry Rank [6] - The Aerospace - Defense Equipment industry has experienced an average gain of 34.9% year-to-date, indicating that AAR is slightly underperforming its industry [6] - Another stock in the Aerospace sector, Woodward (WWD), has also outperformed the sector with a year-to-date return of 9.4% and a Zacks Rank of 2 (Buy) [5]

Glass Lewis' Recommendations - Glass Lewis recommends shareholders vote "WITHHOLD" on Air Products' nominees Charles Cogut, Lisa A Davis, Seifi Ghasemi, and Edward L Monser [1] - Glass Lewis supports all four of Mantle Ridge's director nominees, stating they provide a clear, credible, and proportionate alternative [2][13] - Glass Lewis finds a compelling case for change at Air Products due to years of poor performance, high-cost strategic expeditions, and a faulty succession effort [7][13] Air Products' Performance and Governance Issues - Air Products has generated subpar value for investors due to its capital-intensive non-core strategy [7] - The board has overseen a faulty succession effort, leaving CEO Seifi Ghasemi in an indefinite position of influence [7][13] - The board's relationship with Ghasemi suggests it operates at the direction of the senior executive, undermining governance [16] - Air Products' capital allocation and execution across multiple challenged projects have been poor [9] Mantle Ridge's Nominees and Strategy - Mantle Ridge's nominees are highly qualified, with relevant industry expertise and experience in capital allocation, renewable energy, and energy transition [15] - Paul Hilal is positioned as a shareholder advocate with strong familiarity with Air Products and the industrial gas sector [15] - Dennis Reilley, former CEO of Praxair, brings substantial industry expertise and operational experience [15] - Mantle Ridge's strategy aims to restore performance, fix capital allocation missteps, and ensure long-term leadership stability [13] Air Products' Strategic and Succession Challenges - Air Products' two-pillar growth strategy has faced scrutiny due to delays, scale revisions, and an inability to de-risk projects [16] - The board's succession process, ongoing since January 2023, is criticized for its lengthy timeline and lack of clarity on Ghasemi's future role [16] - The board's recent actions appear reactive and indicative of lax legacy oversight, with disingenuous claims of credit for performance gains [19] Mantle Ridge's Position and Engagement - Mantle Ridge, an engaged long-term owner-steward, holds approximately $1.3 billion of Air Products' common shares [13] - The firm has a history of constructive engagement with companies to create durable long-term value [17] - Mantle Ridge urges shareholders to vote the BLUE proxy card "FOR" its four director nominees and "WITHHOLD" on Air Products' nominees [4][13]

Core Viewpoint - AAR (AIR) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are closely correlated with near-term stock price movements [4][6]. - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Recent Performance and Outlook for AAR - For the fiscal year ending May 2025, AAR is expected to earn $3.64 per share, reflecting a 9.3% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for AAR has increased by 0.1%, indicating a positive trend in earnings estimates [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - AAR's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Core Insights - AAR Corp. reported adjusted earnings of 90 cents per share for Q2 fiscal 2025, exceeding the Zacks Consensus Estimate of 83 cents by 8.4% and showing an 11.1% improvement year-over-year [1] - The company experienced a GAAP loss of 87 cents per share, contrasting with earnings of 67 cents in the same quarter last year [1] Financial Performance - AAR generated net sales of $686.1 million in the quarter, surpassing the Zacks Consensus Estimate of $652.6 million by 5.1% and increasing 25.8% from $545.4 million in the prior-year quarter [3] - The growth in sales was driven by organic growth and increased commercial and government sales [3] Segment Performance - Parts Supply segment sales reached $273.7 million, up 20.3% year-over-year [4] - Repair & Engineering segment reported sales of $228.8 million, a significant increase of 57.4% from the previous year [4] - Integrated Solutions sales amounted to $163.4 million, reflecting a 4.3% increase year-over-year [4] - Expeditionary Services recorded sales of $20.2 million, up 27.8% from the prior-year period [4] Operational Metrics - Adjusted operating margin improved from 8.1% to 9.2%, primarily due to enhanced profitability in the Repair & Engineering segment [5] - Selling, general, and administrative expenses rose to $133.1 million compared to $65.7 million a year ago [5] - Net interest expenses for the quarter totaled $18.8 million, up from $5.6 million in the year-ago period [5] Financial Position - As of November 30, 2024, AAR's cash and cash equivalents were $61.7 million, down from $85.8 million as of May 31, 2024 [6] - Long-term debt increased to $986.7 million from $985.4 million as of May 31, 2024 [6] - Net cash flow from operating activities for the first six months of fiscal 2025 was $3.4 million, compared to a cash outflow of $1.3 million in the same period last year [6]

Financial Data and Key Metrics - No specific financial data or key metrics changes are provided in the content [1][2][3][4][5] Business Line Data and Key Metrics - No specific business line data or key metrics changes are provided in the content [1][2][3][4][5] Market Data and Key Metrics - No specific market data or key metrics changes are provided in the content [1][2][3][4][5] Company Strategy and Industry Competition - No specific details on company strategy, development direction, or industry competition are provided in the content [1][2][3][4][5] Management Commentary on Operating Environment and Future Outlook - The company includes forward-looking statements in its comments, which involve risks and uncertainties that could cause actual results to differ materially from expectations [3] - The company assumes no obligation to update forward-looking statements to reflect future circumstances or events [3] Other Important Information - The call includes discussions of non-GAAP financial information, with a reconciliation to GAAP measures provided in the earnings release [4] Q&A Session - No Q&A session details are provided in the content [1][2][3][4][5]

Group 1 - AAR reported quarterly earnings of $0.90 per share, exceeding the Zacks Consensus Estimate of $0.83 per share, and showing an increase from $0.81 per share a year ago, representing an earnings surprise of 8.43% [1] - The company achieved revenues of $686.1 million for the quarter ended November 2024, surpassing the Zacks Consensus Estimate by 5.13%, and up from $545.4 million year-over-year [2] - AAR has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] Group 2 - The stock has added approximately 1.4% since the beginning of the year, compared to the S&P 500's gain of 1.6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.97 on revenues of $678.62 million, and for the current fiscal year, it is $3.63 on revenues of $2.7 billion [7] - The Aerospace - Defense Equipment industry is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook for the sector [8]

Sales Performance - Consolidated sales for the second quarter of fiscal 2025 increased by $140.7 million, or 25.8%, compared to the prior year quarter, driven primarily by a $115.0 million increase in sales to commercial customers[163]. - Consolidated sales for the six-month period ended November 30, 2024 increased by $252.7 million, or 23.1%, over the prior year period, with a significant contribution from the Product Support acquisition[172]. - Sales in the Parts Supply segment increased by $46.1 million, or 20.3%, over the prior year quarter, primarily due to increased demand and growth from new and expanded distribution agreements[183]. - Sales in the Repair & Engineering segment rose by $83.4 million, or 57.4%, over the prior year quarter, primarily due to the acquisition of the Product Support business, contributing $74.1 million in sales[185]. - Sales in the Integrated Solutions segment increased by $6.8 million, or 4.3%, over the prior year quarter, attributed to higher commercial program activity[187]. - Sales in the Expeditionary Services segment for the six-month period increased by $10.8 million, or 30.9%, primarily due to the termination of the Next Generation Pallet contract[199]. - For the six-month period ended November 30, 2024, sales in the Parts Supply segment increased by $59.0 million, or 12.7%, primarily due to a $62.2 million increase in new parts distribution activities[191]. Profitability - Gross profit for the second quarter of fiscal 2025 increased by $25.2 million, or 24.4%, over the prior year quarter, with gross profit margin on sales to commercial customers decreasing to 19.6% from 20.4%[165]. - Gross profit on sales to government customers increased by $6.1 million, or 24.7%, over the prior year quarter, with gross profit margin increasing to 16.6% from 15.4%[166]. - Operating income decreased by $40.6 million, or 106.0%, from the prior year quarter, primarily due to increased costs for the FCPA settlement[168]. - Operating income in the Parts Supply segment increased by $3.2 million, or 11.3%, compared to the prior year quarter, driven by new parts distribution activities[184]. - Operating income in the Repair & Engineering segment increased by $11.5 million, or 101.8%, with operating margin rising to 10.0% from 7.8% in the prior year quarter[186]. - Operating income in the Repair & Engineering segment for the six-month period increased by $23.5 million, or 115.2%, with operating margin rising to 9.8% from 7.2%[195]. - Operating income in the Expeditionary Services segment increased by $1.3 million, or 144.4%, with operating margin improving to 10.9% from 5.7% in the prior year quarter[190]. Expenses and Financial Charges - Selling, general, and administrative expenses increased by $67.4 million, or 102.6%, over the prior year quarter, primarily due to increased costs related to FCPA investigations[167]. - Interest expense increased by $13.1 million in the second quarter of fiscal 2025, reflecting higher interest rates and average borrowings used to fund investments[170]. - The company recognized a non-cash, pre-tax pension settlement charge of $26.7 million related to the accelerated recognition of unamortized net actuarial losses[179]. Cash Flow and Financing - Net cash provided by operating activities was $3.4 million for the six-month period ended November 30, 2024, an increase of $4.7 million compared to the prior year[219]. - Net cash used in investing activities decreased to $13.2 million from $20.3 million in the prior year, primarily due to favorable post-closing adjustments of $2.9 million[220]. - Net cash used in financing activities was $3.8 million, a decrease of $19.1 million compared to cash provided of $15.3 million in the prior year, mainly due to fewer stock option exercises[221]. - The company borrowed $186.2 million under the Amended Revolving Credit Facility to fund part of the acquisition of the Product Support business[207]. - The company has repurchased 2.2 million shares for an aggregate purchase price of $97.5 million under a stock repurchase program authorized for up to $150 million[218]. Risks and Future Outlook - The company expects long-term strength in aviation products and services, emphasizing investments in both commercial and government markets[160]. - The company continues to face various risks and uncertainties that could materially affect its future performance, including competition and operational challenges[224]. - A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on the company's financial position for the quarter ended November 30, 2024[227]. - There were no significant changes in interest rate risk exposure during the quarter ended November 30, 2024[228]. - The company does not believe a reserve for credit loss is warranted for the customer with delayed collections[217]. Accounts Receivable and Collections - The company experienced delayed collections from a significant regional airline customer, resulting in a net termination charge of $4.8 million due to the termination of a power-by-the-hour program[216]. - As of November 30, 2024, accounts receivable from this customer totaled $15.1 million, with $7.3 million past due, and contract assets of $13.3 million[217]. - At November 30, 2024, the company had working capital of $939.7 million, including cash of $61.7 million, expected to meet cash requirements for at least the next 12 months[204].

Financial Performance - Sales for Q2 FY2025 reached $686.1 million, a 26% increase compared to $545.4 million in Q2 FY2024[7] - Organic growth was 12%, accelerating from 6% in Q1 FY2025[3] - Adjusted EBITDA increased by 42% to $78 million, with adjusted EBITDA margins rising to 11.4% from 10.1% year-over-year[3][4] - The Parts Supply segment saw a 20% sales growth, while Repair & Engineering sales grew by 57% year-over-year[3] - The company reported a GAAP net loss of $31 million, or $(0.87) per share, compared to a net income of $23.8 million, or $0.67 per share, in the prior year[8] - Adjusted net income for the three months ended November 30, 2024, was $32.3 million, compared to $28.8 million in the same period of 2023, representing an increase of 12.2%[33] - Total sales for the three months ended November 30, 2024, reached $686.1 million, a 25.8% increase from $545.4 million in the same period of 2023[36] - Adjusted diluted earnings per share for the three months ended November 30, 2024, was $0.90, compared to $0.81 for the same period in 2023, reflecting a growth of 11.1%[34] Expenses and Costs - Selling, general, and administrative expenses increased to $133.1 million, including $59.2 million for FCPA settlement costs[9] - The company incurred FCPA settlement and investigation costs of $59.2 million for the three months ended November 30, 2024, impacting overall financial performance[33] - Acquisition, integration, and amortization expenses for the three months ended November 30, 2024, totaled $7.2 million, compared to $3.1 million in the same period of 2023[36] Cash Flow and Debt - Cash flow from operating activities was $22 million, up from $17.4 million in the prior year[12] - The company reported a net cash provided by operating activities of $22.0 million for the three months ended November 30, 2024, compared to $17.4 million in the same period of 2023[28] - Cash provided by operating activities for the three months ended November 30, 2024, was $22.0 million, an increase from $17.4 million in the same period of 2023[36] - Adjusted cash provided by operating activities for the three months ended November 30, 2024, was $27.1 million, up from $17.4 million in the same period of 2023[36] - Net debt as of November 30, 2024, was $935.3 million, significantly higher than $211.9 million in the same period of 2023[37] - The net debt to adjusted EBITDA ratio was 3.26 as of November 30, 2024, indicating a higher leverage compared to previous periods[37] - Long-term debt remained stable at $986.7 million as of November 30, 2024, compared to $985.4 million in May 2024[26] Asset Growth - Total assets increased to $2,849.3 million as of November 30, 2024, compared to $2,770.0 million in May 2024, reflecting a growth of approximately 2.85%[26] Segment Performance - Operating income for the Parts Supply segment increased to $31.6 million for the three months ended November 30, 2024, compared to $28.4 million in the same period of 2023[30] - The Repair & Engineering segment saw a significant increase in sales, reaching $228.8 million for the three months ended November 30, 2024, up from $145.4 million in the same period of 2023[30] Future Outlook - AAR expects continued strong sales growth and margin expansion in the second half of FY2025, driven by synergies from the Product Support acquisition[13]