AAR CORP. (AIR) Stock Forecast & Price Target

AAR Corp has demonstrated strong financial performance, highlighted by a remarkable 79% year-over-year increase in EBITDA for its Expeditionary Services segment, resulting in a margin of 15.3%, a significant improvement of 340 basis points. Overall, the company's total EBITDA has risen by 1% year-over-year to $28.1 million, alongside a marginal increase in margin to 13.1%. Additionally, AAR Corp reported a 27% increase in earnings per share to $1.08, surpassing consensus estimates by 10.2%, indicating robust profitability and operational efficiency across its segments.

AAR Corp is anticipated to maintain a trading discount relative to other commercial aerospace and maintenance (AM) peers due to its lower profit margins and prevailing investor sentiment that views the commercial maintenance, repair, and operations (MRO) sector as less appealing compared to other segments of the commercial AM market. The company's government business is exerting additional pressure on overall market sentiment, compounding challenges in its Repair & Engineering segment, which reported a 1% decline in sales despite an organic growth of 8%. Furthermore, concerns are growing regarding potential reductions in investment from original equipment manufacturers (OEMs) and airlines in their service operations, posing increased competition from larger entities within the industry.