AAR Corp Jets Higher on Robust Demand for Aircraft Components

Key Points

• AAR is a leading aviation services provider offering aftermarket parts and maintenance, repair, and overhaul (MRO) services.
• AAR posted 26% YoY revenue growth in its fiscal second quarter 2025 earnings report.
• AAR expects robust demand to continue through the second half of 2025 as margins continue to expand.

AAR Corp NYSE: AIR is a leading aviation services provider for commercial and government customers worldwide. They offer aftermarket aircraft support for airlines, OEMs, fleets, military agencies, and operators. The aerospace sector leader also has one of the largest inventories of used and new airplane parts and a network of maintenance, repair, and overhaul (MRO) facilities offering a comprehensive, integrated solution for its customers.

Unlike its competitors, Boeing Co. NYSE: BA or Airbus SE OTCMKTS: EADSY, AAR is an independent provider that is not affiliated with any specific airline or manufacturer and provides unbiased and objective solutions. The company reported an impressive 26% year-over-year (YoY) revenue surge on record sales and improving margins.

A Stellar Top and Bottom-Line Beat and Raise

AAR reported fiscal second-quarter 2025 EPS of 90 cents, beating consensus estimates by 5 cents. Revenues surged 30% YoY to $686.1 million firming, beating $654.47 million consensus estimates. Organic growth was 12% YoY, accelerating sequentially from 6% in FQ1. Adjusted EBITDA margins increased to 11.4% from 10.1% in the year-ago period. Margin expansion is expected to continue as the company optimizes its portfolio and drives efficiencies.

Solid Segment Growth Driven By Commercial and Government Business

Its Parts and Supply business saw 20% YoY sales growth led by the expansion in commercial new parts distribution activities and growth resumed in used serviceable materials (USM). Availability improved to meet the robust demand for airframe and engine components.

Repair & Engineering sales surged 57% YoY from the meaningful contributions from Product Support acquisition and efficiency gains in its heavy maintenance hangars. Commercial customers account for 73% of consolidated sales, up from 71% in the year-ago period. Government sales rose 16% YoY due to increased order volume for new parts distribution activities.

AAR Wins New Business in the Quarter

A multi-year engine parts agreement was closed to distribute Chromalloy’s Parts Manufacturer Approval (PMA) parts for the CF6-80C2 engine type. AAR will distribute Whippany Actuation Systems components and subassemblies for their actuation product line. Singapore Airlines extended its contract for Airinmar’s full suite of repair cycle management services. AAR agreed to form a joint venture in the Asia-Pacific region with Air France Industries KLM Engineering & Maintenance to support next-generation aircraft. AAR will divest its Landing Gear Overhaul business for $51 million as part of its portfolio optimization strategy.

AAR's CEO, John M. Holmes, commented, "We anticipate continued strong sales growth in the second half of fiscal year 2025. We also expect further margin expansion in the same period as we realize the benefits from continued growth in Parts Supply, synergies from the Product Support acquisition, and the completion of our recently announced divestiture. These margins should improve even further in fiscal year 2026 as we grow the higher margin Product Support business and our hangar expansions in Miami and Oklahoma City come online.”

AIR Stock Is in a Symmetrical Triangle Pattern

A symmetrical triangle is comprised of a descending (falling) upper trendline resistance converging with an ascending (rising) lower trendline support at the apex point. A breakout occurs when the stock surges above the upper trendline resistance. A breakdown occurs when the stock collapses below the lower trendline support. A breakout or breakdown becomes eminent as the stock gets closer to the apex point as the channel narrows.

AIR formed a symmetrical triangle with a descending upper trendline resistance that started at $76.34 on July 18, 2024, and an ascending lower trendline support that started at $54.71 on Aug 5, 2024, converging at the apex point. The lower trendline support tested twice to bounce, and the upper trendline resistance is being tested for the second time in an attempt to break out after gaping on its solid FQ2 earnings report. The daily anchored VWAP support is at $64.41. The daily RSI is rising to the 64-band. Fibonacci (Fib) pullback support levels are at $64.82, $62.00, $59.19, and $55.17.

AIR's average consensus price target is $81.00, implying a 19.84% upside and its highest analyst price target sits at $81.00. It has four Buy ratings from analysts. The stock has a miniscule 1.71% short interest.

Actionable Options Strategies: Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered calls at upside Fib levels executes a wheel strategy for income.