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Why Is AAR (AIR) Up 12.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for AAR (AIR - Free Report) . Shares have added about 12.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AAR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

AAR Q2 Earnings Match Estimates, Sales Rise Y/Y

AAR Corp. reported second-quarter fiscal 2023 adjusted earnings of 69 cents per share, which came in line with the Zacks Consensus Estimate. Earnings recorded a solid surge of 30.2% from the year-ago quarter.

The company reported GAAP earnings per share (EPS) of 64 cents compared with 58 cents generated in the prior-year quarter.

Total Sales

In the quarter under review, AAR generated net sales worth $469.8 million. The reported figure surpassed the Zacks Consensus Estimate of $459 million by 2.4% and also improved 7.6% from $436.6 million recorded in the year-ago quarter.

Segment Details 

In the fiscal second quarter, sales at the Aviation Services segment totaled $445.7 million, up 6.3% year over year.

Expeditionary Services recorded sales of $24.1 million, up 39.3% from $17.3 million in the year-ago quarter.

Operational Update

Adjusted gross profit margin in the reported quarter improved to 18.8% from 18.1% in the prior-year quarter. The margin expansion was the result of favorable impacts of the company’s efforts to reduce cost and improve operational efficiency.

SG&A expenses rose 12.1% to $52.8 million in the fiscal second quarter, driven by increased investments in digital initiatives. Adjusted operating margin expanded to 7.6% from 6.1% in the prior-year quarter, driven by the company’s efforts to improve operating efficiency as well as recovery in commercial sales.

AIR incurred net interest expenses of $2 million in the fiscal second quarter compared with $0.4 million in the year-ago quarter.

Financial Details

As of Nov 30, 2022, AAR’s cash and cash equivalents amounted to $49 million compared with $53.5 million as of May 31, 2022.

AAR reported long-term debt of $197.2 million as of Nov 30, 2022, up from $98.9 million as of May 31, 2022.


How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 6.58% due to these changes.

VGM Scores

At this time, AAR has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise AAR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

AAR is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Heico Corporation (HEI - Free Report) , a stock from the same industry, has gained 3.2%. The company reported its results for the quarter ended October 2022 more than a month ago.

Heico Corporation reported revenues of $609.64 million in the last reported quarter, representing a year-over-year change of +19.7%. EPS of $0.70 for the same period compares with $0.62 a year ago.

For the current quarter, Heico Corporation is expected to post earnings of $0.67 per share, indicating a change of +6.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Heico Corporation. Also, the stock has a VGM Score of C.

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