AAR Corp. (AIR) Misses Q1 Earnings and Revenue Estimates

Aerospace and defense products and services supplier, AAR Corp. AIR reported first-quarter fiscal 2016 (ended Aug 31, 2015) earnings of 23 cents per share, missing the Zacks Consensus Estimate of 28 cents by 17.9%. Quarterly earnings declined 20.7% year over year, hurt by the poorly performing aircraft joint ventures and low operating income.
 

Revenues

In the quarter under review, consolidated sales were $377.8 million, missing the Zacks Consensus Estimate of $414 million by 8.7%. On a year-over-year basis, revenues decreased 4.4% primarily due to lower contribution from its Expeditionary Services segment.

Segment Details

In the reported quarter, Aviation Services' revenues of $315.8 million comprised 83.6% of total revenues. Segmental revenues increased 1.3% from the year-ago quarter on the back of higher aircraft maintenance sales.

The Expeditionary Services segment contributed 16.4% to quarterly revenues, corresponding to $62.0 million, down 25.7% year over year.

Operational Highlights

In the fiscal first quarter, AAR Corp.'s cost of sales declined 2.8% year over year to $323.3 million.

Gross profit margin from continuing operations was 14.4% in the reported quarter compared with 15.8% in the prior-year period.

Selling, general and administrative expenses increased 2.3% year over year to $39.4 million.

The company incurred interest expense of $2 million in the reported quarter, up 68.8% year over year.

Financial Update

AAR Corp.'s cash and cash equivalents as of Aug 31, 2015, came in at $28.7 million, down from $54.7 million as of May 31, 2015.

Net property, plant and equipment were $214.4 million as of Aug 31, 2015, compared with $214.8 million as of May 31, 2015.

As of Aug 31, 2015, total debt increased significantly to $179.5 million from $154 million as of May 31, 2015.

Dividend, Repurchase and Investment

In the first quarter of fiscal 2016, the company paid dividends of $2.6 million and repurchased about 300,000 shares worth $7.1 million in the reported quarter.

AAR Corp. also invested around $20.0 million in net inventory to support future supply chain expansion.

A Glance at its Peer

Triumph Group Inc. TGI reported adjusted earnings from continuing operations for the first-quarter fiscal 2016 (ended Jun 30, 2015) of $1.31 per share, lagging the Zacks Consensus Estimate of $1.33 by 1.5%. However, earnings increased 10.1% from $1.19 per share a year ago.

Zacks Rank

AAR Corp. has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include LMI Aerospace Inc. LMIA and Raytheon Company RTN. While LMI Aerospace sports a Zacks Rank #1 (Strong Buy), Raytheon carries a Zacks Rank #2 (Buy).

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