AAR Corp. (NYSE:AIR) Misses Analysts’ Expectations

AAR Corp. (NYSE:AIR), leading provider of aviation services to commercial and government operators, MROs, and OEMs, stock fell 8.23% (As on September 23, 11:38:15 AM UTC-4, Source: Google Finance) after the company posted lower than expected results for the first quarter of FY 23. The consolidated sales to commercial customers increased 10% over the prior year quarter, primarily due to further recovery in the commercial market. The consolidated sales to government customers decreased 19% due to the natural completion of certain government programs, such as the Afghanistan contracts. Sales to commercial customers were 66% of consolidated sales, compared to 59% in the prior year’s quarter, primarily reflecting the natural completion of certain government programs as well as the continued recovery in the commercial market. Adjusted gross profit margin increased from 16.1% to 18.1%, primarily due to the favorable impact from our actions to reduce costs and improve the operating efficiency. Adjusted operating margin increased from 5.5% to 6.9% as a result of the actions the company took to improve the operating efficiency as well as the recovery in commercial sales.

AAR in the first quarter of FY 23 has reported the adjusted earnings per share of 61 cents, missing the analysts’ estimates for the adjusted earnings per share of 66 cents. The company had reported 2 percent decline in the adjusted revenue to $446 million in the first quarter of FY 23, missing the analysts’ estimates for revenue of $469.9 million.

Additionally, the company had repurchased 0.5 million shares for $21.9 million in conjunction with the $150 million share repurchase program the company announced last year. Cash flow provided by operating activities from continuing operations was $7.0 million during the current quarter. As of August 31, 2022, the net debt was $70.7 million and the net leverage was 0.44x.

On the other hand, during the quarter, the company had announced several new contract awards, including firm-fixed price contract from the U.S. Air Force to produce Next Generation All Aluminum Cargo Pallets with a total contract value, including option periods, of $173.5 million. The contract from the Norwegian Defence Logistics Organisation to provide commercial common parts for the Royal Norwegian Air Force P-8A fleet and the product launch with Textron Aviation Defense of Airvolution, AAR’s customizable, cloud-based, end-to-end repair cycle management tool. The company expects growth to return in the government business.

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