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AAR (AIR) Up 9.2% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for AAR Corp. (AIR - Free Report) . Shares have added about 9.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AIR 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 Corp Q4 Earnings Surpass Estimates, Revenues Lag

AAR Corp reported fourth-quarter fiscal 2018 adjusted earnings of 54 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents by 3.9%. The adjusted figure reflected a year-over-year improvement of 10.2% from 49 cents in the year-ago quarter.

Excluding one-time items, the company reported earnings of 52 cents from continuing operations compared with 48 cents in fourth-quarter fiscal 2017.

In fiscal 2018, the company’s adjusted earnings came in at $1.79 per share, reflecting an annual improvement of 17% from $1.53 generated in fiscal 2017. The bottom-line figure also surpassed the Zacks Consensus Estimate of $1.69 by 6%.

Total Revenues

In the fiscal fourth quarter, net revenues of $473.5 million fell short of the Zacks Consensus Estimate of $476 million by 0.5%. However, the top-line figure increased 5.1% from $450.5 million in the year-ago quarter.

Net revenues in fiscal 2018 totaled $1.75 billion, reflecting an annual improvement of 10% from $1.59 billion generated in fiscal 2017. Nonetheless, the reported figure missed the Zacks Consensus Estimate of $1.82 billion by 3.8%.

Segment Details    

In the reported quarter, revenues from the Aviation Services segment summed $429.6 million, up 2% year over year.

Expeditionary Services garnered revenues of $43.9 million, up 50.3% from $29.2 million in the year-ago quarter.

Highlights of the Release

In the fiscal fourth quarter, AAR Corp’s cost of sales increased 4.3% year over year to $388.8 million.

Selling, general and administrative expenses increased 13.6% to $61.9 million.

The company incurred interest expenses of $2.2 million compared with $1.5 million in the year-ago quarter.

Financial Condition

As of May 31, 2018, AAR Corp’s cash and cash equivalents were $31.1 million, reflecting a massive improvement from $10.3 million as of May 31, 2017.

As of May 31, 2018, net property, plant and equipment were $133.2 million compared with $117.2 million as of May 31, 2017.

As of May 31, 2018, total debt increased to $178.9 million from $156.2 million as of May 31, 2017.

Dividend & Share Buyback

In fiscal 2018, the company paid dividends of $10.3 million or 30 cents per share. Also, the company repurchased 0.3 million of its shares for $13.1 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

AAR Corp. Price and Consensus

 

AAR Corp. Price and Consensus | AAR Corp. Quote

VGM Scores

At this time, AIR has a strong Growth Score of A, though it is lagging a lot on the momentum front 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 B. 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 trending upward for the stock and the magnitude of this revision looks promising. Notably, AIR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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