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Why Is AAR (AIR) Down 9% Since Last Earnings Report?

It has been about a month since the last earnings report for AAR (AIR). Shares have lost about 9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AAR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AAR Corp Q1 Earnings Top Estimates on Higher Y/Y Sales

AAR Corp. reported first-quarter fiscal 2019 adjusted earnings of 54 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents by 3.9%. The adjusted figure reflected a year-over-year improvement of 63.6% from 33 cents registered in the year-ago quarter.

The year-over-year bottom-line growth can be primarily attributed to solid improvement in sales.

Excluding one-time items, the company reported earnings of 54 cents from continuing operations compared with 32 cents in first-quarter fiscal 2018.

Total Sales

In the reported quarter, net sales of $466.3 million exceeded the Zacks Consensus Estimate of $455 million by 2.5%. The top line also increased 17.2% from $397.9 million in the year-ago quarter.

The year-over-year improvement in sales was driven by solid results from AAR Corp's trading, distribution and programs activities. Also, the successful launch of the INL/A Worldwide Aviation Support Services (WASS) program, which achieved full run-rate in July, contributed to the top line.

Segment Details

In the fiscal first quarter, revenues from the Aviation Services segment summed $438.4 million, up 18.1% year over year.

Expeditionary Services garnered revenues of $27.9 million, up 4.9% from $29.2 million in the year-ago quarter.

Highlights of the Release

AAR Corp's cost of sales in the reported quarter increased 17.5% year over year to $395.1 million.

Selling, general and administrative expenses rose 10% to $48.8 million.

The company incurred interest expenses of $1.6 million compared with $1.7 million in first-quarter fiscal 2018.

Financial Condition

As of Aug 31, 2018, AAR Corp's cash and cash equivalents amounted to $22.7 million compared with $31.1 million as of May 31, 2018.

As of Aug 31, 2018, net property, plant and equipment were $132.5 million compared with $133.2 million as of May 31, 2018.

As of Aug 31, 2018, total debt increased to $210.7 million from $178.9 million as of May 31, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, AAR has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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