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Illinois-based aerospace/defense products and services supplier, AAR Corp. (AIR - Analyst Report) reported fiscal fourth quarter 2013 (ending May 31, 2013) adjusted earnings of 50 cents a share, beating the Zacks Consensus Estimate of 44 cents by 13.6% and the year-ago profit level of 45 cents by 11.1%. The higher number mainly reflects impressive results from its Aviation Services division.

For fiscal 2013, adjusted earnings came in at $1.85 per share compared with $1.81 in the previous year.


In the fiscal fourth quarter of 2013, consolidated sales were $553.8 million, down 1.7% year over year. However, revenues came in ahead of the Zacks Consensus Estimate of $543.0 million driven by healthy share gains in commercial aviation services.

In the quarter, Aviation Services’ revenues of $417.2 million comprised 75.3% of total revenues. Segment revenues increased 7.1% from the year-ago comparable quarter.

The Technology Products segment contributed 24.7% of the total revenues in the quarter, corresponding to $136.6 million, down 21.3% year over year.

For fiscal 2013, total revenues increased 3.5% year over year to $2,137.3 million.


Cost of sales in the reported quarter spiked 1.6% year over year to $493.5 million and represented 89% of total revenue. Selling, general and administrative expense was $52.5 million, up 4.0% year over year.

The company's operating margin decreased to 1.6% in the reported quarter from 4.9% in the year-ago comparable quarter.

Balance Sheet/Cash Flow

Exiting the fiscal fourth quarter 2013, AAR Corp's cash and cash equivalents were approximately $75.3 million, up 11.2% year over year. Net property, plant and equipment were $361.7 million, down 5.5% from the year-ago quarter. Total outstanding debt was $708.6 million.

Cash flow from operations in fiscal 2013 was $163.0 million and free cash flow was $125 million. The company expended around $14.6 million to repurchase 1 million shares and paid dividends worth $12.8 million.


Management expects earnings per share for fiscal 2014 to be between $2.00–$2.05 and revenues to fall in the band of $2.175 billion to $2.225 billion.

AAR Corp is confident of its supply chain and repair businesses in fiscal 2014 given its robust position in the growing global outsourced maintenance supply chain market.  The company’s Technology Products unit is expected to achieve revenue stability during the year through operating efficiencies and innovations in lightweight solutions for the marketplace.  

Zacks Rank

Currently, AIR has a Zacks Rank #3 (Hold). However, other aviation companies like Astronics Corporation (ATRO - Snapshot Report), Exelis, Inc. (XLS - Snapshot Report) and B/E Aerospace Inc. (BEAV - Snapshot Report) are worth looking into now. While Astronics and Exelis sport a Zacks Rank #1 (Strong Buy), B/E Aerospace carries a Zacks Rank #2 (Buy).

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