Industry Overview - Rising global aircraft deliveries, expanding airline fleet, and growing demand for maintenance, repair, and overhaul services are driving growth across the aviation services industry, supported by a steady recovery in global air travel and ongoing defense modernization programs [1] - Increased investor interest in aerospace service providers such as Astronics Corporation (ATRO) and AAR Corp. (AIR) is evident due to these trends [1] Company: Astronics Corporation (ATRO) - Astronics specializes in advanced aircraft electrical systems, lighting technologies, and connectivity solutions that enhance passenger experience and cockpit modernization across commercial and military platforms [2] - The company is benefiting from healthy demand in both defense and commercial aerospace markets, with rising global defense spending supporting military aircraft programs and recovery in air travel prompting airlines to invest in cabin power access and in-flight connectivity solutions [4] - Preliminary fourth-quarter revenues for 2025 are projected between $236 million and $239 million, exceeding management's guidance, with full-year revenues around $860 million, indicating solid year-over-year growth [5] - Preliminary quarterly bookings are about $257 million, with full-year orders of roughly $924 million, supporting revenue visibility [5] - The preliminary revenue outlook for 2026 is between $950 million and $990 million, indicating further growth driven by sustained defense spending and continued airline investment in aircraft upgrades [6] - The Zacks Consensus Estimate for ATRO's 2026 sales and earnings per share (EPS) implies improvements of 12.5% and 36.4%, respectively, from the previous year [11] Company: AAR Corp. (AIR) - AAR operates as a diversified aviation services company, providing aftermarket support, parts supply, and integrated solutions to airlines, government customers, and defense contractors worldwide [2] - AIR's recent performance has been bolstered by solid quarterly results, with a reported revenue growth of 16% and a 31% increase in net adjusted earnings compared to the previous year [7] - The company is enhancing its market position through facility expansion and ongoing technology initiatives, including the expansion of its Airframe MRO facility in Oklahoma City to meet growing demand [8] - Positive momentum in AIR's Trax business includes a multi-year contract extension with Air Atlanta Icelandic, which is expected to improve maintenance efficiency and strengthen AIR's technology portfolio [9][10] - The Zacks Consensus Estimate for AIR's fiscal 2026 sales implies a year-over-year improvement of 15.2%, while EPS suggests a 24% surge [12] Comparative Analysis - In the past year, ATRO has significantly outperformed AIR, with ATRO's shares surging 331.5% compared to AIR's 51.1% increase [13] - Astronics is trading at a premium with a forward 12-month price/earnings ratio of 30.24X, compared to AIR's 19.43X [15] - Return on equity (ROE) indicates that ATRO is more effective at converting equity financing into profits compared to AIR [16] Conclusion - Both Astronics and AAR are well-positioned to benefit from favorable aerospace industry trends, but Astronics appears better placed for near-term outperformance due to strong demand across commercial and defense markets, solid order momentum, and an improving earnings outlook [19] - AAR continues to benefit from healthy MRO demand and operational initiatives, but Astronics' stronger growth visibility makes it a more compelling near-term investment [20]

Industry Overview - Rising global aircraft deliveries, expanding airline fleet sizes, and increasing demand for maintenance, repair, and overhaul (MRO) services are driving growth in the aviation services industry, supported by the recovery in global air travel and defense modernization programs [1] - Investor interest is growing in aerospace service providers like Astronics Corporation (ATRO) and AAR Corp. (AIR) due to these trends [1] Company Profiles - Astronics focuses on advanced aircraft electrical systems, lighting technologies, and connectivity solutions, which are crucial for enhancing passenger experience and cockpit modernization in both commercial and military aircraft [2] - AAR operates as a diversified aviation services provider, offering aftermarket support, parts supply, and integrated solutions to airlines, governments, and defense contractors globally [2] Financial Performance - Astronics ended March 2025 with cash and cash equivalents of $26 million and long-term debt of $160 million, indicating a solid solvency position [4] - AAR's cash and cash equivalents were $96.5 million as of May 31, 2025, with long-term debt totaling $968 million, also reflecting a strong solvency position [6] - Astronics reported an 11.3% year-over-year sales improvement in Q1 2025, driven by a 13.3% surge in sales to the commercial transport market [7] - AAR experienced a 12% increase in sales to commercial customers during its fiscal fourth quarter, supported by strong demand for new parts distribution [7] Growth Drivers - The recovery in air passenger traffic post-COVID-19 has been a primary growth catalyst for both ATRO and AIR [7] - Sales growth in defense-related aerospace parts has also contributed to the top-line performance of both companies, with ATRO seeing a 94.8% improvement in sales to the military aircraft market [8] - AAR benefits from rising MRO activity due to aging aircraft and increased fleet utilization, while Astronics is driven by demand for advanced avionics and aircraft electrification [9] Stock Performance - Over the past three months, ATRO has outperformed AIR with a stock increase of 50.5% compared to AIR's 38.1% [17] - In the past year, ATRO's shares surged 50.4%, while AIR rose 17.8% [17] Valuation and Debt Analysis - Astronics is trading at a forward price/earnings ratio of 20.49X, which is higher than AAR's 16.83X, indicating that AAR may offer a more attractive valuation [18] - A comparative analysis shows that ATRO has a lower long-term debt-to-capital ratio of 37.51% compared to AAR's 44.41%, suggesting ATRO is less leveraged [22][23] Conclusion - Both companies are positioned to benefit from long-term aerospace trends, but Astronics appears better positioned for near-term outperformance due to stronger stock performance and financial discipline [24][25]