AAR CORP. (AIR) Stock Forecast & Price Target

AAR is well positioned for durable upside because its largest Parts Supply segment is compounding through new distribution agreements, USM demand, and a favorable mix shift, while 4Q26 delivered 13% organic adjusted sales growth and 19% organic growth in new parts distribution. Management’s fiscal 1Q27 guide of 21%–23% total sales growth and 12.25%–12.75% adjusted EBITDA margins underscores that core operations remain strong, with Repair, Engineering and Software also benefiting from record MRO activity, higher airframe throughput, and recurring Trax revenue. Financial discipline adds support, as net debt fell to $816M and leverage to 2.0x in 4Q26, giving the company room to invest in growth while gradually improving cash conversion.

AAR is vulnerable to a downside case because its earnings still depend heavily on cyclical commercial aftermarket activity, where any slowdown in MRO spending, passenger traffic, or fleet utilization would quickly pressure Parts Supply and Repair & Engineering volumes. Although 4Q26 showed 13% organic adjusted sales growth and 19% organic growth in new parts distribution, the company’s 1Q27 guidance excludes LCP, while the author is trimming adj. EBITDA margin expectations to 12% from 12.5% because of that drag. The outlook is also clouded by government funding uncertainty, including an April 2025 OMB proposal to cut DoS budget funding by about $70M annually, alongside contract losses, termination risk, and lingering litigation exposure.