NYSE:AIR
AAR CORP
A leading global provider of maintenance, repair, and overhaul (MRO) services for commercial and military aircraft engines and components.
Key Metrics
Investment Thesis
Bull Case
AAR Corp offers exposure to the resilient aviation aftermarket sector which historically outpaces GDP growth, supported by a backlog that ensures revenue visibility in high-inflation environments. The company's global footprint and specialized technical expertise create high barriers to entry for new competitors seeking similar market share in engine overhaul.
Bear Case
Profitability compression is evident with net income dropping to $12.5M from $46.3M the previous year, raising concerns about margin stability despite top-line growth. High levels of long-term debt at $968M combined with a significant retained earnings deficit of $969.4M limit financial flexibility for aggressive M&A or heavy capital expansion.
About AAR CORP
AAR Corporation is a global leader in industrial maintenance services, specializing in engine repair, component replacement, and technical support for major airlines and defense contractors. Operating primarily in the aviation aftermarket sector, the company serves clients across commercial aerospace, military, and general aviation markets with a focus on rapid turnaround times and high-quality restoration of complex aircraft systems.
Analysis
Management Discussion
Despite a significant decline in reported net income from $90.2M in 2023 to $12.5M in the latest period, revenue growth remains robust at $2.78B, indicating strong underlying demand for maintenance services. The widening gap between operating profit and net income suggests rising effective tax rates or non-operating expenses impacting bottom-line performance while cash flow from operations of $36.1M provides a healthy liquidity buffer.
Industry Overview
The global aviation maintenance, repair, and overhaul (MRO) industry is valued in the tens of billions and is driven by an aging fleet requiring frequent part replacements and strict regulatory compliance checks. Demand is expected to grow as new aircraft are delivered and older models require more intensive maintenance schedules to meet safety standards.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $1.99B | $2.32B | $2.78B |
| Cost of Revenue | $1.62B | $1.88B | $2.25B |
| Gross Profit | $370.1M | $442.3M | $527.7M |
| Operating Expenses | $248.9M | $384.0M | $488.8M |
| Operating Income | $121.2M | $58.3M | $38.9M |
| G&A | $230.4M | $312.2M | $347.7M |
| Stock-Based Comp | $13.5M | $15.3M | $19.9M |
| D&A | $27.9M | $41.2M | $55.2M |
| Amortization | $1.3M | $7.3M | $16.2M |
| Other OpEx | $18.5M | $71.8M | $141.1M |
| Non-Operating Income | $0 | $0 | $0 |
| Interest Expense | $12.2M | $43.2M | — |
| Interest Income | $1.0M | $2.2M | $1.8M |
| Pre-Tax Income | $121.2M | $58.3M | $38.9M |
| Income Tax | $31.4M | $12.0M | $26.4M |
| Continuing Ops | $89.8M | $46.3M | $12.5M |
| Discontinued Ops | $400.0K | $0 | $0 |
| Net Income | $90.2M | $46.3M | $12.5M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $90.2M | $46.3M | $12.5M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $1.10B | $1.39B | $1.51B |
| Cash & Equivalents | $68.4M | $85.8M | $96.5M |
| Inventory | $574.1M | $733.1M | $809.2M |
| Prepaid Expenses | — | — | $52.6M |
| Other Current Assets | $455.4M | $570.7M | $552.3M |
| Long-Term Assets | $735.2M | $1.38B | $1.33B |
| PP&E (Net) | $126.1M | $171.7M | $158.5M |
| Intangibles | $63.7M | $235.4M | $219.6M |
| Goodwill | $175.8M | $554.8M | $530.8M |
| Operating Leases | $63.7M | $96.6M | $93.3M |
| Other LT Assets | $289.3M | $286.1M | $299.5M |
| Total Assets | $1.83B | $2.77B | $2.84B |
| Current Liabilities | $351.5M | $466.9M | $554.7M |
| Accounts Payable | $158.5M | $238.0M | $303.1M |
| Current Leases | $12.3M | $13.2M | $12.3M |
| Other Current Liab | $1.1M | $-3.6M | $-6.5M |
| Long-Term Liabilities | $382.5M | $1.11B | $1.08B |
| Long-Term Debt | $269.7M | $985.4M | $968.0M |
| LT Operating Leases | $48.2M | $80.3M | $79.6M |
| Other LT Liab | $64.6M | $47.6M | $30.7M |
| Total Liabilities | $734.0M | $1.58B | $1.63B |
| Shareholders' Equity | $1.10B | $1.19B | $1.21B |
| Retained Earnings | $910.6M | $956.9M | $969.4M |
| AOCI | $-23.5M | $-8.8M | $-5.6M |
| Total L&E | $1.83B | $2.77B | $2.84B |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $90.2M | $46.3M | $12.5M |
| Non-Cash Adjustments | $-406.5M | $-527.8M | $-609.5M |
| Working Capital Changes | $339.6M | $525.1M | $633.1M |
| Cash from Operations | $23.3M | $43.6M | $36.1M |
| Capital Expenditures | $29.5M | $29.7M | $34.7M |
| Cash from Investing | $-138.0M | $-758.5M | $10.7M |
| Debt Issuances | — | $550.0M | — |
| Share Buybacks | $50.1M | $5.1M | $10.1M |
| Cash from Financing | $137.7M | $729.2M | $-33.7M |
| FX Effect | $-100.0K | $0 | $0 |
| Net Change in Cash | $22.9M | $14.3M | $13.1M |
| Beginning Cash | $58.9M | $81.8M | $96.1M |
| Ending Cash | $81.8M | $96.1M | $109.2M |
Frequently Asked Questions
How does AAR CORP make money?
The company generates revenue through its core engine services segment offering overhaul and component replacement, a structural and powerplant support division serving major original equipment manufacturers, and a technical services unit providing supply chain logistics and engineering solutions for global airlines.
What are the main risks for AIR?
Cyclical downturns in the commercial aviation industry leading to reduced maintenance demand, potential supply chain disruptions affecting critical spare parts availability, and regulatory changes in environmental compliance that could increase operational costs.
What is AIR's competitive advantage?
AAR Corp possesses a deep network of globally distributed repair centers that minimize aircraft downtime for clients, specialized proprietary manufacturing capabilities for high-value engine components, and long-standing contractual relationships with top-tier aerospace original equipment manufacturers.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.