AAR Misses Q2 Street Estimates; Shares Plunge 5%

AAR shares fell 4.7% in after-hours trading on Thursday after it reported a year-on-year decline of 28% in its Q2 consolidated sales of $403.6 million. It missed Street estimates by $5.82 million. The pandemic-induced weak sales to commercial customers caused the decline, which was partially offset by strength from sales to government customers.

AAR (AIR) EPS declined by 52% to $0.31, but beat analyst estimates by $0.14.

The CARES Act payroll support and improved operating efficiencies contributed towards gross profit margin expansion, from 15.3% to 17.2%, for the global aerospace and defense aftermarket solutions company.

Cash flow from operating activities improved to $27.6 million, from $19.9 million in the year-ago period.

AAR won a five-year contract worth $148.4 million from the Naval Air Systems Command towards contractor logistics services during the quarter. The company also announced multi-year partnerships with Fortress Transportation and Infrastructure Investors, Honeywell, Viasat, and Airinmar.

“We expect the combination of our improved operating efficiency, growth from new business wins, and the commercial market recovery will continue to drive margin expansion,” said John M. Holmes, CEO of AAR.

The stock price has lost 23.2% year-to-date and is trading at a discount of 34.4% to its 52-week high. (See AIR stock analysis on TipRanks)

Canaccord Genuity analyst Kenneth Herbert reiterated a Buy rating on AAR on Tuesday, setting a price target of $40. This target implies that investors could be reaping a 16% gain over the coming 12 months.

Herbert expects AAR to post a Q4 net loss per share of $0.42. The company reported a net loss per share of $0.43 in the year-ago period.

From the rest of the Street, the stock scores a Strong Buy analyst consensus based on 3 Buys and 1 Hold. The average price target of $32.25 implies a downside potential of close to 7% to current levels.