Investment Thesis
AAR Corp demonstrates strong revenue growth of 19.9% YoY, but this growth is not translating to bottom-line performance with net income flat year-over-year and EPS declining 72.9%. Critical concerns include negative operating cash flow of -$31.3M and negative free cash flow of -$47.4M, indicating the company is burning cash despite top-line expansion and raising questions about earnings quality and capital efficiency.
AIR Strengths
- Strong revenue growth of 19.9% YoY demonstrates solid demand in aircraft and parts sector
- Healthy liquidity position with current ratio of 2.84x providing operational flexibility
- Moderate debt-to-equity ratio of 0.61x suggests reasonable leverage levels
AIR Risks
- Negative operating cash flow of -$31.3M contradicts revenue growth, signaling potential working capital issues or earnings quality concerns
- Negative free cash flow of -$47.4M indicates company is consuming rather than generating cash, unsustainable for long-term value creation
- Significant EPS decline of 72.9% YoY despite flat net income suggests substantial share dilution or poor capital allocation decisions
- Low profitability margins (net margin 4.5%, operating margin 6.2%) with weak ROE of 4.4% indicate poor capital efficiency
- Interest coverage ratio of 2.2x provides limited buffer for debt service in economic downturns
Key Metrics to Watch
- Operating cash flow trend - must return to positive territory to validate earnings quality
- Free cash flow generation - critical indicator of sustainable profitability and cash generation ability
- Net income and EPS growth - currently stalling despite revenue expansion, questioning operational leverage
- Working capital management - negative OCF suggests deteriorating collections or inventory management
- Debt service capacity - monitor interest coverage ratio given high long-term debt of $952.7M
AIR Financial Metrics
AIR Profitability Ratios
AIR Balance Sheet & Liquidity
AIR 5-Year Financial Trend
5-Year Trend Summary: AAR CORP's revenue has grown significantly by 34% over the 5-year period, indicating strong business expansion. The most recent EPS of $2.53 reflects profitable operations.
AIR Growth Metrics (YoY)
AIR Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q2 2026 | $686.1M | -$12.6M | $-0.36 |
| Q1 2026 | $661.7M | $18.0M | $0.50 |
| Q3 2025 | $567.3M | -$8.9M | $-0.25 |
| Q2 2025 | $545.4M | -$12.6M | $-0.36 |
| Q1 2025 | $549.7M | -$600.0K | $-0.02 |
| Q3 2024 | $521.1M | $14.0M | $0.39 |
| Q2 2024 | $469.8M | $22.5M | $0.64 |
| Q3 2023 | $452.2M | $21.8M | $0.62 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
AIR Capital Allocation
AIR SEC Filings
Access official SEC EDGAR filings for AAR CORP (CIK: 0000001750)