% | $
Quotes you view appear here for quick access.

AAR Corp. Message Board

  • sugarballs221 sugarballs221 Jun 14, 2012 6:23 PM Flag

    Leaked Information

    This bad news was clearly leaked some time ago. AAR says FY 2013 earnings will at best be 20% below current worst estimates for the year. Revenues will be mostly in line. Someone leaked cost overruns IMO.

    This requires an investigation by both AAR and the SEC.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Sugarballs obviously has an agenda with his ridiculous post about grease monkeys and some arbitrary p/e assignment that I'm willing to bet if asked to explain could probably not venture much past some baseline comparison to peers or something similiar.

      With that being said, he is likely quite right in the information being leaked. The company had released literally all positive headlines for the last several months, save one that was minimal bad news, and yet it continued to dive off a cliff and then we get the press release. Definitely a black eye on the company and management and something to put in the back of your mind going forward.

      I have followed this company since 2003 and seen it continue to grow the top line. The problem is they have failed to truly create long term shareholder value. The company generally performs pretty well, and I currently am quite long on it, but it ends up being a trading stock. The first thing they did to kill it was issue the convertible debt -- almost always a killer to the common shareholder -- seen it too many times to count. They also have far too much intangibles on the book to take the listed BV seriously.

      If margins fail to improve, this trader has them essentially breaking even on a GAAP basis in FY 2014 due to contractual obligations. 2016 could be a subpar year as well on a GAAP basis. Due to this near term unattractiveness, you can likely see the reason for the recent selling ( in addition to the criminal information leak affecting both tangible and intangible aspects). On a cash flow basis, the large CAPEXs are in the rearview according to the most recent 10-K (FY 2012) leaving only LT debt for repayment. This will leave them in a stronger position in CF respect going forward.

      Despite the potential squeak by year of 2014, utilizing low single digit growth rates (which are likely too conservative), adjusting approximately 400M off the top line to account for significant potential DOD cuts after this year, factoring in the share repurchase announcement, discounting all stock options, off balance sheet obligations, all goodwill, etc

      This trader still arrives at $17 a share with the new guidance leaving it approximately 30% undervalued as of today on a bare bones valuation as it is. I will also go out on a limb and say that I expect some sort of dividend increase. Potentially this might wait until after 2014, although cash position and flow would be strong enough to support. None the less, on a smoothed basis over the next decade, I could see annual increases of 5% being quite realistic.

      • 3 Replies to crustytrader
      • Well, I feel pretty good about this call. Hit $17 briefly a few weeks back per my target on 20 June. It has been in the $16's since then. Going to basically say price target reached and step to the sidelines at this point for further developments. Still like this stock long term.

        Sentiment: Hold

      • Hello Crustyftader and thanks for your post in which you questioned why I assigned a p/e of 8 to AAR's adjusted projected earnings. I will try to answer that question now even though you had already helped answer it in your own post.First, what p/e would you assign to a company that apparently leaks information to outside parties and leaves you holding the bag? Second, you said in your post that AAR has failed to deliver long term shareholder value. These two facts increase the risk of buying AAR stock beyond normal business risk so I assigned a conservative p/e of 8.It;s all subjective and only my opinion of course. I had hoped AAR would become the next Aviall but that apparently is not in the cards. I do own AAR stock, much to my chagrin, and the conference call is something I will not miss.

      • On the 2014 GAAP statement in my previous post, I forgot to mention that is already preparing for some bad news from the defensive sector to the tune of about the $400M on the top line. If no DOD/Defense sector contracts are significantly impacted due to the "fiscal cliff" publicized as of late in the media and expected to come to a head at the end of this year, we could still see $0.50+/share GAAP earnings.

    • only 7x earnings on the lowered estimates and they will buy back 11% of the outstanding shares, probably still bottoms in here somewhere.

      • 1 Reply to jiilive
      • What you are not considering is that management now has zero credibility with investors. Given AAR management's performance and conduct in this debacle it would be appropriate to deduct 30% from its new earnings projections. Having proven themselves to simply be pretentious grease monkeys, it is also appropriate to assign a multiple of 8 to the adjusted projected earnings. This gives you a pps of around $8.75.There is still plenty of money to be made on the short side. Sadly, it looks like it was all just war profiteering.

24.32+0.11(+0.45%)2:23 PMEDT