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AAR Corp. (AIR - Analyst Report), Illinois-based aerospace/defense products and services supplier, surpassed its earnings expectation in fiscal 2013 second-quarter with a decent revenue increase, driven by its recent acquisitions. AAR is also in the process of expanding its operations in the recently opened Duluth MRO facility.

Let’s take a brief look at the company’s financials in the recently reported quarter:

Earnings Review

A world leader in aftermarket products and services to the global aerospace industry, AAR Corp. posted a 2.3% increase in earnings year over year to settle at 44 cents per share. It also surpassed the Zacks Consensus Estimate of 41 cents by 7.3%.

Revenue for the reported quarter increased 6.4% to $512.8 million from $482.0 million in the year-ago comparable quarter. The results, however, fell short of the Zacks Consensus Estimate of $550.0 million by 7.25%. Revenue increase was primarily driven by acquisitions as well as the company’s airlift business, partially offset by lower logistics activity.

Read our full coverage on this earnings report: AIR Beats Est, Rev Lags in 2Q13

Earnings Estimate Revisions – Overview

Fiscal earnings estimates have moved up since the earnings release, suggesting that analysts are bullish about the long-term performance of the company.  We take a look at the earnings estimate details.

Agreement of Estimate Revisions

In the last seven days, two out of four estimates have moved up for the third quarter of fiscal 2013. A similar trend followed for fiscal 2013 and 2014, where two out of four estimates were revised upwards. This indicates that the analysts are fairly bullish on the stock for the coming quarter as well as the long-term performance.

Magnitude of Estimate Revisions

Earnings estimate for the third quarter of fiscal 2013 increased by 2 cents in the last seven days, reaching 44 cents. For fiscal 2013, earnings estimates increased from $1.77 to $1.81, while increasing from $2.00 to $2.06 for fiscal 2014.

The Zacks Consensus Estimates represents a year-over-year growth of 6.7% for third quarter, 5.9% for 2013 and 13.5% for 2014.

Our Take

The company is expected to perform well in the future with strong sales growth, mainly from the Commercial sales segment coupled with contribution from acquisitions. AAR has been incessantly trying to focus on the core business, disposing of the non-core assets in the meantime. The cost reduction activities are in place, leading to the possibility of higher earnings. We continue to expect the company to have healthy earnings growth along with an increase in revenues.

We maintain an Outperform recommendation on the stock. Currently, AIR has a Zacks #3 Rank, which translates into a short-term (1-3 months) Hold rating. The company’s prime competitors Boeing Co (BA - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report) have a Zacks #3 rating.

About Zacks Earnings Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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