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AAR Corp (AIR) Beats on Q2 Earnings, Raises Fiscal 2020 View

Zacks Equity Research

AAR Corp. AIR reported second-quarter fiscal 2020 adjusted earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 61 cents by 4.9%. The figure also reflected an improvement of 6.7% from 60 cents reported in the year-ago quarter.

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

Excluding one-time items, the company reported earnings of 58 cents per share from continuing operations compared with 32 cents in second-quarter fiscal 2019.

Total Sales

In the reported quarter, net sales of $560.9 million exceeded the Zacks Consensus Estimate of $529 million by 6%. The top line also increased 13.7% from $493.3 million in the year-ago quarter.

The year-over-year increase was driven by continued growth in the Aviation Services segment, which grew 15% during the quarter.

Segment Details    

In the fiscal second quarter, revenues from the Aviation Services segment summed $532 million, up 15% year over year, driven by strong demand for new and aftermarket parts, significant improvement in Maintenance, Repair and Overhaul (MRO) and solid execution of government contract awards.

Expeditionary Services generated revenues of $28.9 million, down 4.9% from $30.4 million in the year-ago quarter.

Highlights of the Release

AAR Corp’s cost of sales in the reported quarter grew 14.5% year over year to $475 million.

Selling, general and administrative expenses rose 16.3% to $57.1 million.

The company incurred interest expenses of $1.8 million compared with $2.4 million in second-quarter fiscal 2019.

AAR Corp. Price, Consensus and EPS Surprise

AAR Corp. Price, Consensus and EPS Surprise

AAR Corp. price-consensus-eps-surprise-chart | AAR Corp. Quote

Financial Condition

As of Nov 30, 2019, AAR Corp’s cash and cash equivalents amounted to $38.2 million compared with $21.3 million as of May 31, 2019.

As of Aug 31, net property, plant and equipment were worth $134.3 million compared with $132.8 million as of May 31.

As of Aug 31, long-term debt increased to $196.1 million from $141.7 million as of May 31.

Outlook

AAR Corp reaffirmed its financial guidance for fiscal 2020. Management projects sales of $2.15-$2.225 billion and adjusted diluted earnings per share from continuing operations of $2.50-$2.65. The company expects selling, general and administrative expenses to be approximately 10.5% of sales and an effective tax rate of 24% for the fiscal.

Zacks Rank

AAR Corp currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Defense Releases

Lockheed Martin Corp. LMT reported third-quarter 2019 earnings of $5.66 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 12.5%. The bottom line also improved 10.1% from $5.14 in the year-ago quarter.

Textron Inc. TXT reported third-quarter 2019 earnings from continuing operations of 95 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 11.8%. The bottom line increased 55.7% from the year-ago quarter.

General Dynamics Corporation GD reported third-quarter 2019 earnings from continuing operations of $3.14 per share, which beat the Zacks Consensus Estimate of $3.06 by 2.6%. The bottom line also improved 10.2% from the prior-year quarter’s $2.85.

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