AAR’s Quarterly Profit Exceeds Estimates But Sales Disappoint; Shares Gain

Shares of AAR Corp. rose 2.6% in Tuesday’s extended trading session after the aviation company posted better-than-expected fiscal 3Q (ended Feb. 28) earnings. Meanwhile, sales for the quarter missed analysts’ expectations.

AAR’s (AIR) 3Q adjusted earnings were $0.37 per share, down 44.8% year-over-year but beat analysts’ expectations of $0.29.

Sales of $410.3 million missed the Street’s estimates of $414.6 million and decreased 25.8% from the year-ago period. The decline reflected the continued impact of the pandemic on sales to commercial customers, down 42%.

The company’s selling, general and administrative expenses decreased 22.7% year-over-year to $44.9 million. Additionally, the adjusted gross margin was 16.1%, up 10 basis points. (See AAR stock analysis on TipRanks)

AAR CEO John M. Holmes commented, “We are confident in our belief that our differentiated solutions will see greater demand as our airline customers continue to increase their flying activity.”

On March 22, Canaccord Genuity analyst Kenneth Herbert increased the stock’s price target to $48 (20% upside potential) from $40 and maintained a Buy rating on improving optimism on the company’s commercial aerospace recovery and its business, which has mostly returned to pre-crisis levels.

According to Herbert, top-line expectations are manageable, and the stock is likely to benefit further from rising confidence regarding the aerospace recovery.

AAR shares have exploded 162% over the past year, while the stock still scores a Strong Buy consensus rating based on 4 unanimous Buys. That’s alongside an average analyst price target of $47.75, which implies 19.4% upside potential to current levels.

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