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

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AAR Corp. (NYSE: AIR) stock rose over 0.04% on 19th December, 2019 (Source: Google finance) after the company posted mixed results for the second quarter of FY 20 and raised the outlook for FY 20. During the quarter, the cash flow provided from operating activities from continuing operations was $19.9 million, which has increased $35.3 million from the prior year.

AIR in the second quarter of FY 20 has reported the adjusted earnings per share of 64 cents, beating the analysts’ estimates for the adjusted earnings per share of 60 cents. The company had reported the adjusted revenue growth of 13.7 percent to $493.1 million in the second quarter of FY 20, missing the analysts’ estimates for revenue of $525.21 million. The sales includes a14.9% increase in Aviation Services revenues, due to execution on new contract awards and strong demand in the part supply activities.

Gross profit rose 9.7% to $85.9 million. Gross margin within Aviation Services was almost flat at 16.1% for the second quarter, which was positively impacted due to improvement in MRO and offset by some mix in government services and increased costs in certain commercial PBH programs. Consolidated gross margin stood at 15.3% compared to 15.9% in the prior year period, mainly due to Expeditionary Services.

During the quarter, the company had returned $6.7 million to shareholders through a dividend of $0.075 per share or $2.6 million and repurchased 100,000 shares for $4.1 million.

AAR Corp. expects FY20 EPS to be in the range of $2.50-$2.65, versus the consensus of $2.61. AAR Corp. expects FY20 revenue to be in the range of $2.15-2.225 billion, versus the consensus of $2.21 billion. Compared to the previous financial guidance, the midpoint of the revised sales guidance increased from $2.150 to $2.188 billion and the midpoint of the revised adjusted diluted earnings per share from continuing operations increased from $2.55 to $2.58. The company continues to expect selling, general and administrative expenses to be approximately 10.5% of sales and projects an effective tax rate of 24% in FY20.

Meanwhile, during the quarter, the company had expanded the scope of the component repair services program with BAE for its regional jet support programs to include more components. The company has also announced two contracts within the Airinmar subsidiary. The company has signed a three-year agreement with JetBlue to offer component value engineering cost oversight services.

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