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AAR (AIR) Down 3.7% Since Last Earnings Report: Can It Rebound?

·3 min read

A month has gone by since the last earnings report for AAR (AIR). Shares have lost about 3.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

AAR Corp. Q3 Earnings Beat Estimates, Sales Fall Y/Y

AAR Corp. reported third-quarter fiscal 2021 adjusted earnings of 37 cents per share, which surpassed the Zacks Consensus Estimate of 31 cents by 19.4%. The figure reflected a year-over-year decline of 44.8% from earnings of 67 cents registered in the year-ago quarter.

Excluding one-time items, the company reported earnings of 87 cents per share from continuing operations compared with earnings of 7 cents in third-quarter fiscal 2020.

Total Sales

In the quarter under review, net sales totaled $410.3 million. The reported figure missed the Zacks Consensus Estimate of $413 million by 0.7% and also plunged 25.8% from $553.1 million recorded in the year-ago quarter.

The year-over-year decline in sales was due to the continued impact of COVID-19 outbreak.

Segment Details 

In the fiscal third quarter, sales at the Aviation Services segment totaled $389.7 million, down 26.5% year over year.

Expeditionary Services garnered sales of $20.6 million, down 9.6% from $22.8 million in the year-ago quarter.  

Highlights of the Release

AAR Corp.’s cost of sales in the reported quarter fell 33.5% year over year to $324.3 million.

Selling, general and administrative expenses declined 22%.7 to $44.9 million.

The company incurred interest expenses of $1 million compared with $2.3 million in third-quarter fiscal 2020.

Financial Condition

As of Feb 28, 2021, AAR Corp.’s cash and cash equivalents amounted to $99.2 million compared with $404.7 million as of May 31, 2020.

As of Feb 28, 2021, net property, plant and equipment expenses totaled $123.6 million compared with $135.7 million as of May 31, 2020.

As of Feb 28, 2021, long-term debt decreased to $206 million from $600 million as of May 31, 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 69.23% due to these changes.

VGM Scores

At this time, AAR has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise AAR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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