Aviation and defense services provider AAR CORP (NYSE:AIR) will be announcing earnings results tomorrow after the bell. Here’s what you need to know.
AAR’s Recent Performance
Last quarter, AAR beat analysts’ revenue expectations by 2.3%, reporting revenues of $661.7 million, up 20.4% year on year. It was a mixed quarter for the company, with a solid beat of analysts’ Integrated Solutions revenue estimates but a miss of analysts’ adjusted operating income estimates.
Earnings Expectations
This quarter, analysts are expecting AAR’s revenue to grow 19.9% year on year to $654.1 million, improving from the 16.1% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.84 per share.
Analyst Estimates and Price Targets
Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. AAR has missed Wall Street’s revenue estimates three times over the last two years.
Market Sentiment and Sector Performance
With AAR being the first among its peers to report earnings this season, we don’t have anywhere else to look to get a hint at how this quarter will unravel for aerospace and defense stocks. However, the whole sector has faced a sell-off over the last month with stocks in AAR’s peer group down 5.8% on average. AAR is down 4.7% during the same time and is heading into earnings with an average analyst price target of $81 (compared to the current share price of $62.85).
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AAR as a Potential Gorilla Stock
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AAR’s Strengths and Weaknesses
- Strengths:
- AAR has a strong track record of beating revenue estimates.
- The company has a diverse portfolio of services, including aviation services, supply chain management, and defense operations.
- AAR has a history of making strategic acquisitions to expand its capabilities and increase its market share.
- Weaknesses:
- AAR has missed Wall Street’s revenue estimates three times over the last two years.
- The company faces intense competition in the aviation services industry from larger players like United Airlines and Delta Air Lines.
- AAR’s defense operations are heavily dependent on government contracts, which can be unpredictable and subject to changes in government policies.
Conclusion
AAR is a complex company with both strengths and weaknesses. While it has a strong track record of beating revenue estimates and has made strategic acquisitions to expand its capabilities, it also faces intense competition in the aviation services industry and depends heavily on government contracts for its defense operations. As we head into earnings, it’s essential to consider these factors when evaluating AAR’s potential.
Recommendations
- Buy: If you’re bullish on the aerospace and defense sector and believe that AAR will beat revenue estimates, now may be a good time to buy the stock.
- Sell: If you’re bearish on the sector or have concerns about AAR’s ability to meet earnings expectations, it may be best to sell the stock before earnings.
Final Thoughts
AAR is a unique company with both strengths and weaknesses. While it has made significant progress in recent years, it still faces challenges from intense competition and government contracts. As we head into earnings, it’s essential to consider these factors when evaluating AAR’s potential. Whether you’re bullish or bearish on the stock, now may be the perfect time to make your move.
What To Expect From AAR’s Earnings
Tomorrow after the bell, AAR will announce its Q4 earnings results. Based on analyst estimates, we can expect:
- Revenue growth of 19.9% year on year to $654.1 million.
- Adjusted earnings per share of $0.84.
- A mixed quarter with a solid beat of analysts’ Integrated Solutions revenue estimates but a miss of analysts’ adjusted operating income estimates.
How To Prepare For Earnings
To prepare for AAR’s earnings, we recommend:
- Reviewing the company’s recent performance: AAR has beaten analyst revenue expectations by 2.3% last quarter and reported revenues of $661.7 million, up 20.4% year on year.
- Analyzing the company’s strengths and weaknesses: AAR has a strong track record of beating revenue estimates but faces intense competition in the aviation services industry and depends heavily on government contracts for its defense operations.
- Considering analyst estimates: Analysts have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings.
Conclusion
AAR is a complex company with both strengths and weaknesses. While it has made significant progress in recent years, it still faces challenges from intense competition and government contracts. As we head into earnings, it’s essential to consider these factors when evaluating AAR’s potential.