AAR Corp. AIR recently expanded its supply agreement with MTU Maintenance to deliver used serviceable materials (USM) for RTX Corporation’s RTX Pratt & Whitney PW2000 engines. With this multi-year agreement, AAR Corp. strengthened its long-standing alliance with MTU, established in 2009, and marked the fourth successful contract extension.
Such a longstanding partnership demonstrates the reliability of AAR Corp’s products, which are dedicated to delivering cost-effective solutions for its customers.
Usage of AAR Corp.’s USM
AAR Corp. is a leading supplier of USM to support engine overhauls. As a premier supplier of such parts, the company witnesses significant demand from many top aircraft manufacturers.
Particularly, AAR Corp. has been a long-term supplier of USM for RTX’s PW2000 engine, which powers all models of the twin-engine Boeing 757 and Pratt & Whitney’s F117 engine used to power C-17 Globemaster III military transport. AIR’s USM is also used in RTX’s PW2040 engine, which powers the U.S. Air Force’s C-32A.
Growth Prospects
Due to the growing socio-political unrest worldwide, nations are spending heftily these days to secure their borders, with fighter jets playing a key role in defending a country’s safety. This, along with growing commercial air traffic in recent times, has boosted the demand for commercial and fighter jets, which is likely to propel order growth for Pratt & Whitney jet engines. This brightens the prospects for AAR Corp. to continue to serve its customers with the supply of USM, like the latest contract extension, bolstering AIR’s revenue generation prospects.
Per the report from the Market Research Future firm, the USM market is projected to witness a CAGR of 4.1% from 2023 to 2032. This entails the further expansion of the USM market, which promises opportunities for companies like AAR Corp.
Another defense major poised to benefit from the expanding size of the market is Boeing BA.
Boeing’sUSM programs provide economic solutions for components and enable extended fleet effectiveness through diverse product offerings. USM inventory supports Boeing and non-Boeing platforms for commercial, business and helicopter operators, and MROs and engine overhaul shops.
Boeing boasts a long-term earnings growth rate of 4%. Shares of BA have increased 33.5% in the past year.
Price Performance
Shares of AAR Corp. have soared 41.9% in the past year compared with the industry’s growth of 17.3%.
Image Source: Zacks Investment Research
Zacks Rank & Another Key Pick
AAR Corp. carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same industry is BAE Systems plc BAESY, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BAE Systems’ long-term earnings growth rate is pegged at 14%. The Zacks Consensus Estimate for its 2023 sales suggests a growth rate of 33.6%.
The Zacks Consensus Estimate for its 2023 earnings calls for a growth rate of 16.6%. Its shares have appreciated 45.7% in the past year.
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