Post Earnings Coverage as AAR Corporation Q1 Earnings Beat Expectations

LONDON, UK / ACCESSWIRE / September 27, 2016 / Active Wall St. announces its post-earnings coverage on AAR Corp. (NYSE: AIR). The company reported its financial results for the first quarter fiscal 2017 (Q1 FY17) on September 22, 2016. The Wood Dale, Illinois-based company’s Q1 FY17 sales and diluted earnings per share from continuing operations improved 4.7% and 38% on y-o-y basis, respectively; both outperforming market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on August 31, 2016, AAR reported sales of $404.8 million compared to sales of $386.7 million recorded at the end of Q1 FY16. The increase in quarterly sales is primarily attributed to strong results in the company’s Aviation Services segment. The company’s quarterly sales numbers beat market estimates of $400 million.

The aviation support company recorded net income of $9.5 million, or $0.28 per diluted share, in Q1 FY17 compared to a net income of $22.9 million, or $0.65 per diluted share, in the previous year quarter. Additionally, net income from continuing operations for Q1 FY17 came in at $9.9 million, or $0.29 per diluted share, which was above $7.4 million, or $0.21 per diluted share, reported in Q1 FY16 and market consensus estimate of $0.28 per diluted share.

During Q1 FY17, the company repurchased 619,000 shares worth $14.8 million at an average price of $23.94 per share. As of August 31, 2016, the company had additional $67.9 million available under its Board-authorized share repurchase program.

Operational Metrics

In Q1 FY17, AAR reported operating income of $16.7 million which came in above $13.6 million recorded in the year ago period. The company’s SG&A expenses as a percentage of sales came in at 11.1% for Q1 FY16 versus 10.3% in Q1 FY16. The company attributes this increase in SG&A expenses to investments in new business development.

Segment-wise

AAR’s Aviation Services segment sales for Q1 FY17 increased $18.8 million, or 6% y-o-y, to $334.6 million from $315.8 million reported in Q1 FY16. The segment’s gross profit improved to $53.4 million from $49.9 million. Additionally, the segment reported gross profit margin of 16% in Q1 FY17.

The company’s Q1 FY17 Expeditionary Services segment sales were down marginally to $70.2 from $70.9 million in Q1 FY16. However, the segment’s gross profit surged to $8.1 million in Q1 FY17 from $4.0 million, or 14.0% of segment sales, in Q1 FY16. Furthermore, the segment had gross profit margin of 11.5% for Q1 FY17, which was above 14.0% of segment sales reported in Q1 FY16, reflecting improved profitability in Mobility products.

Cash Matters and Balance Sheet

In Q1 FY17, the company reported negative cash flow from operations of $0.5 million compared to a negative cash flow from operations of $64.4 million in the last year’s quarter. AAR had cash and cash equivalents and investments worth $7.9 million on August 31, 2016 versus $31.2 million as on close of books in the year-ago period.

During Q1 FY17, AAR spent $9.4 million as capital expenditures $14.9 million in depreciation and amortization expenses. The company added $7.1 million to its total debt which stood at $143.7 million as on August 31, 2016. Additionally, AAR had low debt-to-capital ratio of 14% as at the close of books in the reported quarter.

Guidance

In its guidance for full year fiscal 2017, the company forecasts diluted earnings from continuing operations to be in the range of $1.30 per share to $1.40 per share. The management expects SG&A as a percentage of sales to move closer to the target of 10% of sales increased over the rest of fiscal 2017.

Stock Performance

The stock closed Monday’s trading session at $29.23, falling 2.12% from its previous closing price of $29.66. A total volume of 400.99 thousand shares have exchanged hands, which was higher than the 3-month average volume of 237.60 thousand shares. AAR Corp.’s stock price rallied 17.06% in the last month, 30.70% in the past three months, and 25.85% in the previous six months. Furthermore, since the start of the year, shares of the company has gained 11.50%. The stock is trading at a PE ratio of 25.03 and has a dividend yield of 1.03%.

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