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AAR Corp. (AIR) Acquires Trax USA Corp. for $120M Plus Earn-Out

AAR Corp. AIR recently completed the acquisition of the aircraft maintenance, repair and operation (MRO) and fleet management software provider, Trax USA Corp. Per the agreement, AAR Corp. acquired the company for $120 million plus up to a $20-million earn-out payment.

The acquisition is expected to expand AAR Corp.’s offerings in digital solutions for its core aviation aftermarket customers, bolstering its revenue generation prospects.

Benefits of the Acquisition

AAR Corp.’s Aviation Services segment provides aftermarket support and services for the commercial aviation and government and defense markets, including inventory management and distribution services, MRO services and engineering services. The segment accounted for 95% of its sales in fiscal 2022. The Trax acquisition is expected to broaden its exposure to aftermarket customers in the aviation industry.

Trax boasts a diversified strong customer base of airlines, MROs and government aircraft operators supporting as many as 5000 aircraft, thus providing an established customer-client base to AAR Corp. Its critical software applications will offer higher margin advantages to AAR Corp. with recurring revenue benefits and will be accretive to its earnings.

The acquisition will assist AAR Corp. in scaling up its aftermarket service operations and broadening its product portfolio, which tends to accelerate its revenue generation prospects.

Peer Moves

Acquisitions are pursued by companies to expand into new markets and broaden the product portfolio, which will complement their strategy to achieve long-term goals. In this regard, apart from AAR Corp., defense majors that have engaged in the acquisition strategy to boost their growth trajectory are as follows:

In December 2022, L3Harris Technologies, Inc. LHX signed an agreement to acquire Aerojet Rocketdyne for $58 per share in an all-cash transaction valued at $4.7 billion, including net debt.

L3Harris boasts a long-term earnings growth rate of 2.6%. The Zacks Consensus Estimate of sales of $17.67 billion suggests a growth rate of 3.6% from the prior-year reported figure.

In November 2022, Curtiss Wright CW announced that it completed the acquisition of the stock of Keronite Group Limited for $35 million in cash.

The Zacks Consensus Estimate for Curtiss Wright’s 2023 earnings has been revised upward by 1.5% in the past 60 days. Shares of CW have appreciated 11.8% in the past year.

In October 2022, Teledyne Technologies TDY entered into an agreement to acquire ETM-Electromatic to strengthen its capabilities in microwave-combining technologies and the high-power gallium nitride-based solid-state power amplifier.

Teledyne’s long-term earnings growth rate is pegged at 6.8%. Shares of TDY have increased 20.8% in the past six months.

Price Performance

Shares of AAR Corp. have risen 4.4% in the past year against the industry’s fall of 3.1%.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank

AAR Corp. carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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AAR Corp. (AIR) : Free Stock Analysis Report

Teledyne Technologies Incorporated (TDY) : Free Stock Analysis Report

Curtiss-Wright Corporation (CW) : Free Stock Analysis Report

L3Harris Technologies Inc (LHX) : Free Stock Analysis Report

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