Airplane parts and service provider
AAR
beat earnings estimates in its latest quarter report, and grew sales 23% year over year. The aerospace business continues to recover from Covid-induced lows. What’s more, a government shutdown won’t derail growth.
Tuesday evening, AAR (ticker: AIR) reported fiscal-first-quarter adjusted earnings of 78 cents per share on sales of $550 million. Wall Street was looking for earnings of 71 cents per share on sales of $508 million. A year ago, AAR earned 61 cents per share on sales of $446 million in sales.
“This was a very strong start to the year, and I am both encouraged by our sustained momentum and proud of our team for continuing to deliver,” said CEO John Holmes on the earnings conference call.
Strength was broad-based. Sales to commercial customers were up 34% year over year, while parts-supply sales rose 40%. Growth is evidence of the continuing recovery in commercial aerospace. Domestic air travel, trips that originate and finish in the same country, exceeded pre-Covid levels for the first time in April. International travel is still about 11% below pre-Covid levels.
AAR deserves some of the credit for year-over-year improvement, too. “AAR’s adjusted operating [profit] margins of 7.3% were up from 6.9% year over year, marking AAR’s 10th consecutive quarter of operating-margin expansion,” wrote Benchmark analyst Josh Sullivan in a Wednesday report. He rates AAR stock at Buy with a $65 price target.
Looking ahead, the business should continue to grow. “Assuming no extended government shutdown, we expect both year-over-year and sequential sales and earnings growth,” added Holmes on the conference call. “Specifically, we anticipate mid- to high-teens [percentage] year-over-year sales growth with operating margins similar to or better than what we delivered in Q2 of last year.”
A government shutdown isn’t expected to materially impact the company. Previously awarded contracts keep paying. “It may have some impact on our government distribution operations in terms of payment timing, orders, and shipments,” said Holmes. “In general, we see a constrained budgetary environment as supportive of our efficient commercial best practices offering to our government customers.”
Investors appear happy with the solid quarter. AAR stock is up 2.4% at $60.65 in premarket trading while
S&P 500
and
Dow Jones Industrial Average
futures are up 0.4% and 0.3%, respectively.
Coming into Wednesday trading, AAR stock is up about 32% year to date, and up about 69% over the past 12 months.
Write to Al Root at [email protected]
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