AAR Corp. AIR entered into a multi-year agreement with Ontic. Viewed as a significant step forward, the agreement grants AAR the rights to provide a strategic selection of military products to the U.S. government, with exclusivity on specific parts. Simultaneously, Ontic, a reputed supplier of parts and services to the aircraft aftermarket, is poised to enhance its offerings to better assist American warfighters.
AAR eagerly anticipates incorporating the Chatsworth, CA facility into its Ontic alliance, a move that is set to bolster its strategic military portfolio. Presently, AAR supports commercial distribution for Ontic’s Creedmoor, NC, plant, as well as military distribution for Ontic’s Cheltenham, United Kingdom, facility. This mutually beneficial agreement is expected to pave the way for fruitful collaboration between the two entities, ultimately leading to improved operational efficiency and enhanced customer service for Ontic.
Ontic aims to leverage AAR’s support to streamline turnaround times and enhance product availability to its esteemed U.S. government customers.
AAR’s Emphasis on Diverse Service Offerings
Amidst the gradual recovery in the commercial aircraft fleet and the soaring demand for advanced aircraft, AAR continues to exhibit strong performance in its parts supply and program activities.
The company witnessed a noteworthy 24% surge in consolidated sales to commercial customers during the second quarter of fiscal 2023, primarily driven by robust demand for its new and used parts offerings. Concurrently, its consolidated sales to government customers experienced a 1% uptick, backed by growth across government programs in its Integrated Solutions segment.
The burgeoning air travel industry signals a promising outlook for commercial fleet services, affording AAR ample growth opportunities. In a strategic and forward-looking move, AAR recently inked a multi-year extension and expansion contract with ASL Aviation Holdings DAC to provide flight-hour component support services. This expansion includes the incorporation of ASL Airlines France, ASL Airlines United Kingdom, and ASL Airlines Ireland into AAR’s existing agreement with ASL Airlines Belgium, signaling an expected increase in the number of supported ASL aircraft from 28 to 65.
Further bolstering its commercial service capabilities, AAR entered into an agreement to acquire Triumph Group’s Product Support business in December 2023. These significant developments position the company to harness considerable potential in the commercial and government services sector.
Industry Peers and Market Trends
It is noteworthy that AAR is not the only aerospace company positioned to benefit from the thriving commercial aircraft services market. Industry peers such as RTX Corp. RTX, Triumph Group TGI, and Boeing BA are also carving their path to success in this domain.
RTX’s subsidiary, Collins Aerospace, observed a remarkable 25% growth in its commercial aftermarket segment during the third quarter of 2023. Triumph Group, meanwhile, experienced a robust 27% contribution from commercial aftermarket sales to its overall sales during the second quarter of fiscal 2024. Boeing Global Services also made significant strides with the receipt of substantial orders and the signing of valuable contracts, indicative of its strong presence in the commercial aviation market.
These industry players’ long-term earnings growth rates, backed by the Zacks Consensus Estimates, reiterate the positive trajectory. RTX’s long-term earnings growth rate stands at 9.35%, Triumph Group forecasts a 60.9% year-over-year increase in fiscal 2025 earnings, while Boeing Global Services anticipates a 47.9% improvement in 2024 earnings based on the Zacks Consensus Estimate.
Stock Performance and Future Prospects
Over the past year, AAR’s stock has exhibited a resilient performance, registering a 35.5% increase, outpacing the industry’s 29.1% growth. This upward momentum is indicative of the favorable market reception and investors’ confidence in AAR’s strategic initiatives and growth prospects.
Image Source: Zacks Investment Research
Zacks Rank Evaluation
AAR currently holds a Zacks Rank #4 (Sell).
For a comprehensive list of today’s Zacks #1 Rank (Strong Buy) stocks, you can visit here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
