Bullish stock to watch: AAR Corp. (NYSE: AIR)

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AAR Corp. (NYSE: AIR) stock rose over 5.8% in the pre-market session of July 11th, 2019 (Source: Google finance) after the company beat the earnings estimate for the fourth quarter of FY 19. Capital expenditures for the fourth quarter were $5.1 million and depreciation and amortization was $11.5 million. Net interest expense was $2.1 million compared to $2.2 million, last year. During the fourth quarter, the cash flow from operating activities from continuing operations was $44.1 million, which is net of a $13.3 million reduction in the AR (ph) program. Also, AIR has repurchased 291,000 shares for $9.5 million.

As part of the previously communicated strategy to shift to an asset like GOCO business model, AIR has signed a definitive agreement to sell certain assets in the GOCO business. In the fourth quarter, AIR had announced the extension of the engine support contract with MTU. AIR has also received certification from the Japan Civil Aviation Bureau, the JCAB, that will expand the Japanese customer base and further strengthen the Company’s position in Asia. Subsequent to the fourth quarter end, the company had announced an exclusive distribution arrangement with Woodward to support the US military and a joint repair management contract with Global Aerospace Logistics or GAL, focused on UAE military fleets.

AIR in the fourth quarter of FY 19 has reported the adjusted earnings per share of 64 cents, beating the analysts’ estimates for the adjusted earnings per share of 62 cents. The company had reported the adjusted revenue growth of 19 percent to $562.7 million in the fourth quarter of FY 19 mainly driven by sales and the parts supply activities along with the loss program. FLT has experienced growth in both segments, including a $78.2 million or 18% increase in Aviation Services revenues, and $11 million or 37% increase in Expeditionary Services revenues.

Moreover, the gross profit grew 11.8% or $10 million to $94.7 million. Gross margin was 16.8% compared to 17.9% in the prior year period, primarily due to the labor challenges in MRO and mix in Expeditionary Services.

For FY 20, the company expects sales to be between $2.1 billion and $2.2 billion, which represents a growth rate of 5% at the midpoint. AIR expect diluted earnings per share from continuing operations to be in the range of $2.45 a share to $2.65 a share, which represents a growth rate of 8% at the midpoint of the range.

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