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AAR (AIR) Up 10.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for AAR (AIR). Shares have added about 10.3% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

AAR Corp. Q2 Earnings Beat Estimates, Sales Fall Y/Y

AAR Corp. reported second-quarter fiscal 2021 adjusted earnings of 31 cents per share that surpassed the Zacks Consensus Estimate of 17 cents by 82.4%. However, the figure reflected a year-over-year decline of 51.6% from earnings of 64 cents registered in the year-ago quarter.

Excluding one-time items, the company reported earnings of 41 cents per share from continuing operations compared to the earnings of 57 cents in second-quarter fiscal 2020.

Total Sales

In the quarter under review, net sales totaled $403.6 million. The reported figure came almost in line with Zacks Consensus Estimate of $404 million but plunged 28% from $560.9 million recorded in the year-ago quarter.

The year-over-year decline in sales was due to the continued impact of COVID-19 outbreak.

Segment Details

In the fiscal second quarter, sales at the Aviation Services segment totaled $385 million, down 27.6% year over year.

Expeditionary Services garnered sales of $18.6 million, down 35.6% from $28.9 million in the year-ago quarter.

Highlights of the Release

AAR Corp’s cost of sales in the reported quarter fell 29.7% year over year to $334.1 million.

Selling, general and administrative expenses declined 24% to $43.4 million.

The company incurred interest expenses of $1.3 million compared with $1.8 million in second-quarter fiscal 2020.

Financial Condition

As of Nov 30, 2020, AAR Corp’s cash and cash equivalents amounted to $110 million compared with $404.7 million as of May 31, 2020.

As of Nov 30, 2020, net property, plant and equipment totaled $125 million compared with $135.7 million as of May 31, 2020.

As of Nov 30, 2020, long-term debt decreased to $220.3 million from $600 million as of May 31, 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 36.21% due to these changes.

VGM Scores

At this time, AAR has a strong Growth Score of A, a grade with the same score on the momentum front. 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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