We recently maintained our Outperform recommendation on
), one of the leading suppliers of aftermarket products and
services to the global aerospace/aviation industry. Headquartered
in Delaware, the company conducts its business mainly through 7
A strong aviation market in the fiscal 2013 is expected to
augment the commercial air transport sector, helping the company
to prosper. Besides, the strategic contract wins coupled with a
strong operating efficiency of the company is indeed a
A reduction in the leased aircraft portfolio in order to
remain focused on the core business also exhibits strong
possibilities for the company to become a specialist in the
industry it operates.
However, we are conscious of the overcapacity in the
commercial aviation market, adjustment in the military spending
along with a margin pressure on the company.
The company's results in the fiscal second quarter 2013 showed
signs of growth due to market share gains in the aviation sector
along with the disposal of non-core assets of the company. The
company had a strong balance sheet, exiting the
The 6.4% increase in total revenue was overshadowed by a 5.5%
increase in the cost of sales; earnings per share came in at 44
cents per share. The company's operating margin increased to 7.4%
in the reported quarter from 7.1% in the year-ago comparable
A positive earnings surprise of roughly 7% in the trailing two
quarters, along with an increase in the earnings guidance by
management, reinforces our belief that the company will continue
to outperform the market in the future.
The current Zacks Consensus Estimate for the third quarter is
42 cents, growth of roughly 1.8% year over year. Estimates for
2013 and 2014 are $1.79 and $2.06, respectively. These represent
annual increase of 4.4% in 2013 and 15.1% in 2014.
Currently, AIR has a Zacks #3 Rank, which translates into a
short-term (1-3 months) Hold rating. The company's prime
Lockheed Martin Corporation
) have a Zacks #3 Rank (Hold).
AAR CORP (AIR): Free Stock Analysis Report
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