AAR Corp (NYSE:AIR), a leading provider of aviation services to commercial and government operators, stock rose 3.02% (As on September 27, 11:17:58 AM UTC-4, Source: Google Finance) after the company posted better than expected results for the first quarter of FY 24. The consolidated sales to commercial customers increased 34% over the prior year quarter, primarily due to strong demand for the new and used parts offerings, while the consolidated sales to government customers increased 3%. Sales to commercial customers were 71% of consolidated sales, compared to 66% in the prior year quarter.  Parts Supply revenue grew 40% due to investments the company made in prior quarters in anticipation of strong demand. Further, in Repair & Engineering the hangars were largely full throughout the summer and flight hours continue to recover globally which drove growth in Integrated Solutions. Adjusted gross profit margin increased from 18.1% to 18.4%, primarily due to the favorable impact of our operating efficiency on increased sales volumes.

AIR in the first quarter of FY 24 has reported the adjusted earnings per share of 78 cents, beating the analysts’ estimates for the adjusted earnings per share of 69 cents. The company had reported the adjusted revenue growth of 23 percent to $549.7 million in the first quarter of FY 24, beating the analysts’ estimates for revenue by $42.44 million. Selling, general, and administrative expenses were $74.7 million in the quarter, which included increased investments in the business, $2.8 million related to Trax acquisition and amortization expenses as well as $11.2 million for the Russian legal charge. Adjusted operating margin increased from 6.9% to 7.3%, primarily as a result of the growth in commercial sales. Sequentially, the adjusted operating margin decreased from 7.8% to 7.3%, driven by a shift in the mix of products and services sold.

Additionally, Cash flow used in operating activities from continuing operations was $18.5 million during the current quarter reflecting attractive inventory investments to support both USM demand and the continuing ramp-up of recently signed distribution agreements.  As of August 31, 2023, the net debt was $236.7 million and the net leverage was 1.18x.

Meanwhile, during and subsequent to the quarter, the company had announced multiple new contract awards, including two multi-year commercial agreements with Moog Inc. with one agreement covering our distribution of their products applicable to mature aircraft platforms and the other agreement establishing reciprocal component repair services and exclusive multi-year foreign military distribution agreement with Pall Corporation for their highly engineered filtration products and solutions.