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AAR (AIR) Down 2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AAR (AIR - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.

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

AAR Corp. Earnings Beat Estimates in Q3, Sales Miss

AAR Corp. reported third-quarter fiscal 2020 adjusted earnings of 67 cents per share, which surpassed the Zacks Consensus Estimate of 66 cents by 1.5%. The figure also reflected a year-over-year improvement of 8.1% from 62 cents.

Excluding one-time items, the company reported earnings of 7 cents from continuing operations compared with 78 cents in third-quarter fiscal 2019.

Total Sales

In the reported quarter, net sales of $553.1 million missed the Zacks Consensus Estimate of $558 million by 0.9%. However, the top line grew 4.5% from $529.5 million in the year-ago quarter.

The year-over-year improvement in sales was driven by continued growth in the company’s Aviation Services segment.

Segment Details    

In the fiscal third quarter, sales from the Aviation Services segment summed $530.3 million, up 6.6% year over year.

Expeditionary Services registered sales of $22.8 million, down 29.1% from $32.2 million in the year-ago quarter.

Highlights of the Release

AAR Corp.’s cost of sales in the reported quarter increased 9.8% year over year to $487.8 million.

Selling, general and administrative expenses rose 6% to $58.1 million.

The company incurred interest expenses of $2.3 million compared with $2.4 million in third-quarter fiscal 2019.

During the quarter, the company paid out cash dividends of $2.6 million, in line with the cash dividends paid out in third-quarter fiscal 2019.

Financial Condition

As of Feb 29, 2020, AAR Corp.’s cash and cash equivalents amounted to $37 million compared with $21.3 million, as of May 31, 2019.

As of Feb 29, 2020, net property, plant and equipment expenses were $136.7 million compared with $132.8 million, as of
May 31, 2019.

As of Feb 29, 2020, long-term debt decreased to $206 million from $141.7 million, as of May 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -193.33% due to these changes.

VGM Scores

At this time, AAR has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

AAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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