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AAR Corp. (AIR) Clinches an Agreement With Collins Aerospace

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AAR Corp. (AIR - Free Report) recently clinched a distribution agreement with Collins Aerospace’s Cloud Cap Technology business, a unit of Raytheon Technologies (RTX - Free Report) . With this agreement, AAR Corp aims to strengthen its position in the Unmanned Aerial System (“UAS”) market.

RTX’s Collins Aerospace business unit provides a secure platform to access the TASE Imaging System and the Piccolo autopilot system through Cloud Cap Technology. Per the agreement, AAR Corp will stock, promote and sell the TASE and Piccolo imaging payload and flight management systems, thus expanding its product portfolio in the UAS market.

Benefits of the Agreement

UAS plays a pivotal role in surveillance and reconnaissance in a military mission. This involves technologically advanced equipment that enables the smooth collection of intelligence, surveillance and reconnaissance (ISR) data.

While RTX’s TASE Imaging System provides a superior onboard imaging performance, Piccolo flight management systems offer solutions, including core autopilot, flight sensors, navigation, wireless communication and payload interfaces, all in a small, highly integrated and inexpensive package. Thus, the Cloud Cap Technology business plays a vital role in extracting useful ISR data.

AAR Corp already enjoys an established position in distribution activities for various military customers. The company now gets a platform to support ISR missions through the agreement by embracing the unique products of Cloud Cap Technology and offering them in end markets.

The agreement leverages AAR Corp to expand its customer base, ranging from UAS manufacturers and airframers to civil and government operators, boosting its sales channel capabilities. This shall bolster its original equipment manufacturer service revenue generation prospects, thus providing an edge to the overall top line.

Growth Prospects

Per the report from Markets and Markets, the unmanned aerial vehicle (UAV) market is projected to witness a CAGR of 7.9% from 2022 to 2027. This entails the further expansion of the UAV market, which promises opportunities for companies in the UAS market and increases the requirement for various equipment involved in UAS manufacturing.

The aforementioned factors brighten AAR Corp.’s prospects for clinching more distribution agreements for UAS-related parts. Defense majors that are poised to benefit from the expanding size of the market are as follows:

Lockheed Martin’s (LMT - Free Report) Skunk Works provides next-generation systems that combine stealth technology, open system architecture, manned/unmanned teaming and persistent ISR capabilities.

Lockheed Martin’s long-term earnings growth rate is pegged at 6.9%. Shares of LMT have returned 6.5% value to investors in the past year.

Boeing (BA - Free Report) has developed unmanned vehicles that operate in the sea, across the ground, in the air and beyond Earth's atmosphere. Among others, its MQ-25 unmanned aircraft system designed for the U.S. Navy mission provides the needed robust refueling capability, thereby extending the combat range of the deployed Boeing F/A-18 Super Hornet, Boeing EA-18G Growler and Lockheed Martin F-35C fighters.

Boeing boasts a long-term earnings growth rate of 4%. Shares of BA have increased 6.6% in the past year.

Price Performance

Shares of AAR Corp. have risen 12.7% in the past year against the industry’s fall of 4.1%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank

AAR Corp. carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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