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AAR (AIR) Up 6.7% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for AAR Corp. (AIR - Free Report) . Shares have added about 6.7% in that time frame, outperforming the market.

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

AAR Q4 Earnings Top Estimates, Revenues Up Y/Y

AAR reported fourth-quarter fiscal 2017 earnings of $0.44 per share, which surpassed the Zacks Consensus Estimate of $0.43 by a penny. Earnings were up 29.4% from the year-ago figure of $0.34.

Full-year earnings from continuing operations came in at $1.45, up 31.8% from $1.10 in the year ago.

Total Revenue

Net sales came in at $492.3 million in the fiscal fourth quarter, beating the Zacks Consensus Estimate of $422 million by 5.8%. Also, revenues increased 5.1% from $468.6 million in the year-ago quarter.

Full-year revenues were $1,767.6 million, up 4% from $1,698.9 million in a year ago.

Segment Details

In the reported quarter, Aviation Services reported revenues of $421.3 million, up 5.2% year over year. The upside was driven by continued strong performance by the company's industry leading supply chain management solutions.

Expeditionary Services garnered revenues of $71 million, up 4.1% from $68.2 million in the year-ago quarter.

Highlights of the Release

In the fiscal fourth quarter, AAR Corp.’s cost of sales increased 2.4% year over year to $412.5 million.

Selling, general and administrative expenses increased 23.8% to $58.2 million.

The company incurred interest expenses of $1.5 million, higher than $1.2 million in the year-ago quarter.

Financial Condition

AAR Corp.’s cash and cash equivalents as of May 31, 2017 were $10.3 million down from $31.2 million as of May 31, 2016.

Net property, plant and equipment were $201.9 million as of May 31, 2017 compared with $238.1 million as of May 31, 2016.

As of May 31, 2017, total debt increased to $159.3 million from $150.1 million as of May 31, 2016.

Dividend History

During the fiscal fourth quarter, the company has paid dividends of $2.5 million or $0.075 per share.

Share Repurchase Authorization

AAR Corp.'s board of directors recently approved a share buyback program to return more value to investors. The latest authorization will allow the company to spend up to $250 million to repurchase its common stock.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 20.8% due to these changes.

AAR Corp. Price and Consensus

AAR Corp. Price and Consensus | AAR Corp. Quote

VGM Scores

At this time, AAR's stock has a strong Growth Score of 'A', though it is lagging on the momentum front with a 'C'. 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 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.




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