Why Is AAR (AIR) Up 0.3% Since Last Earnings Report?
A month has gone by since the last earnings report for AAR (AIR). Shares have added about 0.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AAR due for a pullback? 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 Beats on Q2 Earnings, Ups Fiscal 2020 View
AAR Corp. reported second-quarter fiscal 2020 adjusted earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 61 cents by 4.9%. The figure also reflected a year-over-year improvement of 6.7% from 60 cents reported in the year-ago quarter.
The year-over-year growth can be primarily attributed to solid improvement in sales.
Excluding one-time items, the company reported earnings of 58 cents from continuing operations compared with 32 cents in second-quarter fiscal 2019.
Total Sales
In the reported quarter, net sales of $560.9 million exceeded the Zacks Consensus Estimate of $529 million by 6%. The top line also increased 13.7% from $493.3 million in the year-ago quarter.
The year-over-year increase in sales was driven by continued growth across its Aviation Services segment, which grew 15% during the quarter.
Segment Details
In the fiscal second quarter, revenues from the Aviation Services segment summed $532 million, up 14.9% year over year, driven by strong demand for both new and aftermarket parts, significant improvement in Maintenance, Repair and Overhaul (MRO) and solid execution on our government contract awards.
Expeditionary Services generated revenues of $28.9 million, down 4.9% from $30.4 million in the year-ago quarter.
Highlights of the Release
AAR Corp’s cost of sales in the reported quarter grew 14.5% year over year to $475 million.
Selling, general and administrative expenses rose 16.3% to $57.1 million.
The company incurred interest expenses of $1.8 million compared with $2.4 million in second-quarter fiscal 2019.
Financial Condition
As of Nov 30, 2019, AAR Corp’s cash and cash equivalents amounted to $38.2 million compared with $21.3 million as of May 31, 2019.
As of Aug 31, net property, plant and equipment were worth $134.3 million compared with $132.8 million as of May 31.
As of Aug 31, long-term debt increased to $196.1 million from $141.7 million as of May 31.
Outlook
AAR Corp reaffirmed its financial guidance for fiscal 2020, which includes sales of $2.15-$2.225 billion and adjusted diluted earnings per share from continuing operations of $2.50-$2.65. The company expects selling, general and administrative expenses to be approximately 10.5% of sales and anticipates an effective tax rate of 24% for the fiscal.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -8.33% due to these changes.
VGM Scores
At this time, AAR has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Outlook
AAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AAR Corp. (AIR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
