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Share Repurchase for AAR

Zacks Equity Research

Earlier this week, AAR Corp. (AIR) declared its decision to buy-back shares of up to $50 million from its shares outstanding in the market. This share repurchase authorization program replaces the previous one initiated in 2006.

As per this new share repurchase program, AAR will have the discretionary power to repurchase its common stock under the prevailing market and business conditions at any time. A Rule 10b-18 can be entered into by the company under its own jurisdiction for facilitating its share repurchases even under restricted security laws. The program is also liable to be terminated at any time the Board of Director wishes to cancel or discontinue it.

Management averred that the company is in a good position to buy-back stock judging by its current performances and long-term targets. The recent trading range of AAR’s common stock is also at a favorable position for repurchasing activities to take place, according to the company’s Chairman and CEO, David P. Storch.

In a separate story, on June 14, 2012, AAR declared preliminary results of its fourth quarter ending May 31, 2012 and also announced guidance for fiscal 2013. Among the most important highlights, management expects total sales to fall within $560 million - $565 million along with diluted earnings per share (EPS) of 44 cents – 46 cents in its fourth quarter. For fiscal 2013, AAR expects sales to be within $2.1 billion - $2.2 billion and diluted of EPS $1.55 - $1.66 for the full fiscal year.

The company should, however, be aware of the ominous competition prevalent in the industry. Big players to remain wary of in this regard include Hexcel Corp. (HXL), Rolls Royce Holdings plc (RYCEY) and Teledyne Technologies Inc. (TDY).

At present we have a ‘Neutral’ recommendation on AAR. The stock carries a Zacks #4 Rank, which translates into a short-term rating of ‘Sell’.

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