AAR Corp Jets Higher on Robust Demand for Aircraft Components

Core Viewpoint - AAR Corp is a leading independent aviation services provider, reporting significant revenue growth and margin expansion, driven by strong demand in both commercial and government sectors [2][5][7]. Financial Performance - AAR reported fiscal Q2 2025 EPS of 90 cents, exceeding consensus estimates by 5 cents, with revenues increasing 30% YoY to $686.1 million, surpassing the$654.47 million consensus [2]. - Organic growth accelerated to 12% YoY from 6% in the previous quarter, with adjusted EBITDA margins rising to 11.4% from 10.1% YoY [2][4]. Segment Performance - The Parts and Supply business experienced 20% YoY sales growth, driven by new parts distribution and improved availability of used serviceable materials [4]. - Repair & Engineering sales surged 57% YoY, attributed to contributions from acquisitions and efficiency gains, with commercial customers now accounting for 73% of consolidated sales [5]. Business Developments - AAR secured new multi-year agreements for engine parts distribution and extended contracts with major clients, including Singapore Airlines [6]. - The company plans to divest its Landing Gear Overhaul business for $51 million as part of its portfolio optimization strategy [6]. Future Outlook - AAR's CEO anticipates continued strong sales growth and further margin expansion in the second half of fiscal year 2025, driven by growth in Parts Supply and synergies from recent acquisitions [7]. - The company expects margins to improve further in fiscal year 2026 as it expands its higher-margin Product Support business [7]. Stock Analysis - AAR's stock is currently in a symmetrical triangle pattern, with a price target of$81.00, indicating a potential upside of approximately 19.84% [10]. - The stock has a low short interest of 1.71% and is rated as a "Buy" by analysts, although it is not among the top recommendations from leading analysts [3][10][11].